CANADA FX DEBT-Loonie swoons against dollar on budget release

    * Canadian dollar at C$1.277
    * The price of oil falls 1.6 percent 

 (Updates quotes, prices, news)
    By Kate Duguid
    NEW YORK, Feb 27 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday as the greenback rose on
the release of testimony that showed new U.S. Federal Reserve
Chairman Jerome Powell will continue on the gradual monetary
rate path pursued by his predecessor Janet Yellen, and as Ottawa
unveiled its federal budget.
    In his first public appearance as head of the U.S. central
bank, Powell vowed to prevent the economy from overheating while
sticking with a plan to gradually raise interest rates. He
acknowledged the economy had strengthened recently, a remark
that prompted investors to increase bets on four rate increases
in 2018.             
    "The Fed chairman’s comments today have clearly opened the
door to the possibility of a fourth rate increase over the
course of 2018," said Shaun Osborne, chief FX strategist at
Scotia Capital in Toronto.  
    At 4:06 p.m. ET (2106 GMT), the Canadian dollar        was
trading at C$1.277 to the greenback.
    Canada's Liberal government tackled long-term growth
challenges on Tuesday in a budget aimed at boosting women in the
workforce and diversifying trade, while keeping its fiscal
powder dry in case of an economic shock like the demise of
    Finance Minister Bill Morneau's budget outlined slight
deficit improvements without much in the way of new spending,
refusing to blink in the face of U.S. corporate tax cuts and
trade uncertainty that strike fear into Canadian companies.
    U.S. trade officials are due to meet auto industry
executives on Tuesday, Reuters reported, in a possible sign of
increased discussion of automotive content requirements that
have become a sticking point in efforts to rework the NAFTA
trade deal.             
    The loonie has weakened against the dollar in seven of the
last eight sessions as the dollar has retraced some of its
losses since it hit a three-year low on Feb. 16. 
    The Bank of Canada is on course to raise interest rates
twice more this year as it aims to strike a balance between a
stronger economy and a number of economic risks, including trade
negotiations and new housing regulations, a Reuters poll found.
    The central bank has raised interest rates three times since
last July, amid a robust job market and solid economic growth,
but policymakers have said repeatedly they will be cautious in
considering further hikes.      
    Figures for Canada's fourth-quarter economic growth will be
released on Friday, with analysts expecting the annualized rate
will come in below the Bank of Canada's 2.5 percent forecast.
    U.S. crude        prices were down 1.6 percent at $62.91 a

 (Reporting by Kate Duguid; Editing by Bill Trott and Lisa