TORONTO: The Canadian dollar fell to a fresh 12-year low against its US counterpart on Thursday as a rout in stocks and weaker crude oil prices weighed on commodity-linked currencies, but it pared some losses after a speech by Bank of Canada Governor Stephen Poloz.
The latest tumble in crude oil prices and the loss of momentum in the Canadian economy has led to speculation Canada's central bank will cut interest rates. But some analysts said Poloz's speech did not seem to hint at a cut.
"He is repeating many of the themes from before the holidays about how they have policy flexibility and the necessary tools if they need them," said Derek Holt, vice president of economics at Scotiabank.
Oil fell below $33 a barrel for the first time since April 2004 as a fall in Chinese stocks rattled investors already concerned by near-record production and massive stockpiles of unwanted crude and refined products.
Poloz is scheduled to give a press conference at 9:15 a.m. EST (1415 GMT). It may be a better venue for him to focus on recent market developments, according to Holt, including China's attempts to devalue its currency in an orderly fashion and the knock-on effects on commodities.
"I wouldn't be surprised to see a bit more dovish bias and discussion at the press conference than in the speech," Holt added.
At 8:53 a.m. EST (1353 GMT), the Canadian dollar was trading at C$1.4130 to the greenback, or 70.77 US cents, weaker than the Bank of Canada's official close on Wednesday of C$1.4080, or 71.02 US cents.
The currency's strongest level of the session was C$1.4065, while it hit its weakest level since July 2003 at C$1.4170.
US crude prices were down 2.94 percent to $32.97 a barrel, while Brent crude lost 2.72 percent to $33.3.
Canadian government bond prices were mixed across the maturity curve, with the two-year price down 2 Canadian cents to yield 0.422 percent and the benchmark 10-year rising 8 Canadian cents to yield 1.319 percent.
The Canada-US two-year bond spread was 2.3 basis points narrower at -54.6 basis points, while the 10-year spread was 0.8 of a basis point narrower at -84.1 basis points as Treasuries outperformed on a flight to safety.
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