Expectations for more interest rate hikes in Canada tumbled after Bank of Canada Governor Stephen Poloz said the central bank would need to assess the impact of lower oil prices and as a new threat emerged to U.S.-China trade relations.
Chances of an interest rate hike at the central bank's next meeting in January slumped to 10 percent from about 60 percent before an interest announcement on Wednesday, when the central bank left its benchmark interest rate on hold at 1.75 percent and was more dovish than some investors expected.
"The statement from the bank earlier this week was one of the main factors pushing the Canadian dollar lower, on top of, as you can imagine, the stock market weakness," said Simon Côté, managing director, risk management solutions, National Bank Financial.
Stocks fell as the arrest of a top Chinese technology executive stirred fears of fresh tensions between the United States and China over trade.
Canada exports many commodities, including oil, so its economy could be hurt if the global flow of trade or capital slows.
U.S. crude oil futures settled 2.7 percent lower at $51.49 a barrel after major oil producers ended a meeting without announcing a decision to cut crude output.
At 3:56 p.m. (2056 GMT), the Canadian dollar
The decline for the loonie came as data showed that Canada's trade deficit widened in October to C$1.17 billion. Separate data showed that the pace of purchasing activity in Canada expanded at a slower pace in November.
Canada's employment report for November is due on Friday.
The Canadian dollar will rally over the coming year if oil prices recover and the Bank of Canada continues lifting interest rates, according to a poll of currency strategists who have become less bullish on prospects for the currency.
Canadian government bond prices were higher across the yield curve, with the 10-year
(Additional reporting by Saqib Iqbal Ahmed; Editing by Bernadette Baum and Alistair Bell)
By Fergal Smith
