February 27, 2018 / 2:57 PM / 3 months ago

CANADA FX DEBT-C$ dips against greenback bolstered by Fed remarks, ahead of budget

    * Canadian dollar at C$1.272
    * The price of oil falls less than 0.1 percent
    * Federal budget to be released later Tuesday

    By Kate Duguid
    NEW YORK, Feb 27(Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Tuesday morning as the greenback
rose on the release of testimony that showed new U.S. Federal
Reserve chief Jay Powell will continue on the gradual monetary
rate path pursued by his predecessor, and ahead of Ottawa
unveiling its federal budget.
    Fed policymakers anticipate three rate increases this year,
and Powell, who replaced Janet Yellen, gave no indication in
prepared remarks to the House Financial Services Committee that
the pace needs to quicken even as the "tailwinds" of government
stimulus and a stronger world economy propel the U.S. recovery.
            
    Canadian Finance Minister Bill Morneau is expected to unveil
a restrained budget on Tuesday, with just enough spending to
assuage middle-class voters under pressure from rising rates -
while keeping his powder dry amid uncertainty over NAFTA.
            
    Markets will get updated forecasts on the size of the
deficit and will look for any planned return to balance.
    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.      
    On Feb. 23, domestic data showed stronger-than-expected
inflation in January. But other recent data, including
manufacturing shipments, wholesale trade and retail sales have
pointed to a slowdown in growth at the end of 2017.
    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.
    The price of oil, one of Canada's major exports, edged lower
ahead of weekly data that is forecast to show a rise in U.S.
crude inventories, although investor faith in OPEC's ability to
curtail production helped stem a larger price slide.
            
    U.S. crude        prices were down less than 0.1 percent at
$63.82 a barrel.
    At 9:40 a.m. EST (1440 GMT), the Canadian dollar         
was trading at C$1.272 to the greenback.
    The U.S. dollar slumped to its lowest levels since late 2014
against a basket of major currencies        earlier in February,
but it has since recovered almost 2 percent.

 (Reporting by Kate Duguid; Editing by Bill Trott)
  
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