* Canadian dollar hits lowest level since Jan. 15
* Lower commodity prices, equities, blamed for C$ fall
* C$ slide comes ahead of expected BoC interest rate cut
By Frank Pingue
TORONTO, Jan 20 (Reuters) - The Canadian dollar was down nearly 1 percent versus the U.S. dollar on Tuesday given the combination of lower commodity prices and a drop in equity markets overnight that led to safe-haven demand for the greenback.
The drop in the Canadian dollar comes ahead of the Bank of Canada's interest rate announcement at 9:00 a.m. (1400 GMT) , when the bank is widely expected to cut its key overnight rate by 50 basis points to 1.00 percent.
At 7:55 a.m. (1255 GMT), the Canadian unit was at C$1.2648 to the U.S. dollar, or 79.06 U.S. cents, down from C$1.2547 to the U.S. dollar, or 79.70 U.S. cents, at Monday's close.
Canada is a major exporter of oil, so the drop in oil prices of near 10 percent to below $34 a barrel helped to knock the domestic currency to its lowest level since Jan. 15.
The Canadian dollar, along with most major currencies, was also being dragged lower versus the U.S. dollar as a slide in global equity markets due to fears about the world economy that made investors seek out the security offered by the greenback.
"It's pretty much a bit of everything," said George Davis, chief technical strategist at RBC Capital Markets, "There is not much out there that is really positive for the Canadian dollar right now."
Earlier, the Canadian dollar fell as low as C$1.2660 to the U.S. dollar, or 78.99 U.S. cents, which was 0.89 percent down from Monday's close and its lowest level in nearly one week.
Oil prices had been a key driver in the Canadian currency and one of the main reasons for its rise above the U.S. dollar in 2007 when it topped out at just above US$1.10.
So with oil prices more than $110 below the record highs above $147 a barrel hit last July, an unravelling in the domestic currency's gains comes as no surprise.
The market has already largely priced in a 50 basis point rate cut from the Bank of Canada, so it is going to take a more dramatic announcement or severe change in the central bank's tone to spark a move in the currency.
"If we happen to get a larger than expected rate cut that certainly would be a negative factor for the Canadian dollar and indicate that things might be a little worse than what people were thinking," said Davis.
"I think it's highly unlikely that we get less than a 50 basis point rate cut, but even if we do I think that if there is any knee-jerk rally in the Canadian dollar it is likely to be short-lived because equity markets are still the main driving factor for the Canadian currency."
(Editing by Chizu Nomiyama)