Canadian dollar weakens with oil, as Poloz signals no rush to hike

TORONTO (Reuters) - The Canadian dollar weakened against the greenback on Thursday, as lower oil prices offset stronger-than-expected domestic data and Bank of Canada Governor Stephen Poloz continued to signal a more gradual pace of future interest rate hikes.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015./File Photo

At 4:04 p.m. (2104 GMT), the Canadian dollar was trading 0.3 percent lower, at 1.3222 to the greenback, or 75.63 U.S. cents. The currency, which notched a two-week high on Wednesday, at 1.3151, traded in a range of 1.3163 to 1.3232.

Poloz indicated he was in no rush to resume monetary tightening, saying that while interest rates needed to move up into a neutral range of between 2.5 percent and 3.5 percent over time, the path back was now “highly uncertain.”

The Bank of Canada has raised interest rates by 125 basis points since July 2017. Chances of another hike by the end of the year were unchanged from Wednesday at less than 20 percent, data from the overnight index swaps market indicated.

Poloz’s comments “didn’t add anything knew,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. “The event risk of this is out of the picture now and oil prices are softer. The end result is buying of USD-CAD.”

The price of oil, one of Canada’s major exports, sank below recent 2019 highs as U.S. government data showed a sharp build in crude stocks and record production, while concerns about slowing global economic growth weighed on the market.

U.S. crude oil futures settled 0.4 percent lower at $56.96 a barrel, while Wall Street lost ground after data showing that new orders for key U.S.-made capital goods unexpectedly fell in December.

In contrast, Canadian wholesale trade beat analysts’ forecasts for a 0.1 percent decline. Wholesale trade increased by 0.3 percent in December from November on stronger sales in the motor vehicle and parts subsector, Statistics Canada said.

A separate report, from ADP, showed that Canada added 35,400 jobs in January as hiring increased in the trade, transportation and utilities and professional and business services sectors.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year fell 4.5 Canadian cents to yield 1.795 percent and the 10-year declined 19 Canadian cents to yield 1.917 percent.

Reporting by Fergal Smith; editing by Jonathan Oatis and Leslie Adler