TORONTO: The Canadian dollar strengthened against its U.S counterpart on Thursday after a speech by Bank of Canada Governor Stephen Poloz in London was viewed by the market as less dovish than expected.
In remarks that underscored the possibility the central bank will keep interest rates steady next month, Poloz said the bank's quarter-point rate cut in January has bought it time to examine the effects of cheaper oil on the economy of Canada, a major oil producer.
Poloz also repeated the bank's view that the negative effects of lower oil prices are beginning to appear and the positive effects will take longer to emerge.
"He was a little less dovish than perhaps people might have thought and he's still sticking to the patience: wait for the effects of the January rate cut to go through," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada.
"So, relatively neutral so far. The fact that some had thought dovish, that's what caused the currency to rally this morning."
At 10:00 a.m. EDT (1400 GMT), the Canadian dollar was at C$1.2462 to the greenback, or 80.24 US cents, up from Wednesday's North American session close of C$1.2517, or 79.89 US cents.
Investors remained focused on Poloz, who was set to take questions from reporters in London later on Thursday.
Canadian government bond prices were mostly lower across the maturity curve, with the two-year down 14 Canadian cents to yield 0.579 percent and the benchmark 10-year down 73 Canadian cents to yield 1.418 percent.
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