18.04.201823:50:00UTC+00Canadian Dollar Drops after Poloz Reiterates Cautious Outlook

The Canadian dollar extended its drop versus the greenback on Wednesday after the country's central bank governor reiterated the need for a cautious approach to interest-rate hikes despite the improving outlook for the economy.

The Bank of Canada kept its benchmark interest rates steady at 1.25 percent as widely expected earlier this morning but signalled in its accompanying statement that more rate hikes are possible amid an acceleration in inflation and expectations that the economy will bounce back in the second quarter.

However, Stephen Poloz, the bank's governor, beat back on expectations of a quicker pace of tightening during the subsequent press conference, saying the BoC “can't be definitive about when or at what pace” these rises could take place.

The Canadian central bank has already hiked interest rates three times since last summer to a nine-year high of 1.25 percent. However, the markets have started reeling back expectations for further BoC tightening after the country recorded a sharper-than-expected slowdown during the fourth quarter, alongside a spate of mixed economic readings.

The Canadian dollar, which was down 0.2 percent ahead of the decision, fell as much as 0.9 percent to C$1.2660 during the press conference. It is currently trading down 0.7 percent at C$1.2638.