CANADA FX DEBT-C$ drops on Poloz comments, shrugs off new finance minister
* Canadian dollar at C$1.1184 or 89.41 U.S. cents * Bond prices lower across the maturity curve By Leah Schnurr TORONTO, March 19 (Reuters) - The Canadian dollar weakened to its lowest level in nearly a month against the greenback on Wednesday, extending the previous session's rout after comments from the head of the Bank of Canada that analysts said struck a more dovish tone than expected. Analysts said there was little impact on the currency from news that Energy Minister Joe Oliver will be sworn in on Wednesday as Canada's new finance minister, following Jim Flaherty's resignation on Tuesday. The Conservative government was seen as likely to stay the course on fiscal policy. Bank of Canada Governor Stephen Poloz warned in a speech on Tuesday about the risk of a prolonged period of sluggish growth and low interest rates, while also noting it was unlikely that bad weather was entirely to blame for recent economic weakness in Canada. The comments served to reinforce the market's view that interest rates will stay low for some time. Asked during a press conference whether he could rule out a rate cut, Poloz said he could not, though he also said that the bank's stance was neutral. "I think the comments were generally seen as dovish," said Shaun Osborne, chief currency strategist at TD Securities in Toronto. "The underlying message here is that the economy is still struggling a little bit, inflation is still very low and stuck at the low end of the (Bank of Canada's target) range, and we may need a somewhat softer Canadian dollar to help facilitate that rotation away from domestic consumption to more export-led growth." Monetary policy has been a major driver of the Canadian dollar in recent months after the central bank shifted gears last year by dropping any mention of interest rate hikes on the horizon. The drop in the loonie likely signals a resumption of the trade seen in January that took the currency sharply lower, Osborne said. The Canadian dollar has consolidated in a narrow trading range since mid-February, but many analysts say the currency has further to fall. Osborne has a target for the loonie to fall to C$1.1760, or 85 U.S. cents, by end of June. The Canadian dollar was at C$1.1184 to the greenback, or 89.41 U.S. cents, weaker than Tuesday's close of C$1.1137, or 89.79 U.S. cents. The currency fell as low as C$1.1196, its weakest since late February. "The reaction to Governor Poloz's dovish speech and follow-through in the Asian and European session suggest there is pent-up demand to increase already short Canadian dollar positions," Camilla Sutton, chief currency strategist at Scotiabank, wrote in a note. Investors were also focused on a policy statement from the U.S. Federal Reserve due later in the day at the conclusion of its two-day meeting, the first meeting with Janet Yellen at the helm. The Fed is expected to further trim its monthly bond purchases and could alter its guidance on when it might raise interest rates. Canadian government bond prices were lower across the maturity curve, with the two-year off 2 Canadian cents to yield 1.017 percent and the benchmark 10-year down 12 Canadian cents to yield 2.419 percent. (Editing by Peter Galloway)
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