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FOREX-Dollar slips, hits 3-1/2-month low vs loonie, as eyes turn to Fed
June 13, 2017 / 7:15 PM / in 5 months

FOREX-Dollar slips, hits 3-1/2-month low vs loonie, as eyes turn to Fed

    * Canadian dollar rises after cenbank hints at rate hike
    * Dollar dips as investors focus on Fed's two-day meeting
    * Sterling retraces Monday losses

 (Updates to afternoon U.S. trading, adds analyst quote, data)
    By Dion Rabouin
    NEW YORK, June 13 (Reuters) - The U.S. dollar fell to its
lowest against the Canadian dollar since late February on
Tuesday after hawkish comments from Bank of Canada Governor
Stephen Poloz.
    Poloz said that the central bank's 2015 interest rate cuts
"have largely done their work," signaling that the BOC could
raise interest rates sooner than previously thought.
            
    Bank of Canada Senior Deputy Governor Carolyn Wilkins said
late on Monday that first-quarter growth in Canada had been
"pretty impressive," and that signs economic growth was
broadening would lead the central bank to consider whether
current low rates would still be required.              
    "It's one of the biggest moves we've seen over the past
year" in the Canadian dollar, said Mark McCormick, North
American head of FX strategy at TD Securities in Toronto.
"That's dragging some of the dollar bloc currencies with it."
    Speculators have more than 120,000 short contracts on the
Canadian dollar, with net short bets remaining near a record
high, according to data from the Commodity Futures Trading
Commission and Reuters.    
    "The market had been overlooking the strengthening economic
data from Canada, and obviously now that we’re starting to see
some change in communication from the Bank of Canada to
acknowledge that ... the market won’t be able to look through
that," said MUFG currency economist Lee Hardman, in London. 
    "The shift to a more hawkish stance will offer the potential
for the Canadian dollar to strengthen further from here." 
    The U.S. dollar, meanwhile, fell 0.15 against a basket of
currencies to a five-day low ahead of the start of the Federal
Open Market Committee's June policy meeting       , as the euro
edged higher       , staying just above $1.12.
    Investors' focus Wednesday will be on the Fed's statement
following the meeting and its assessment of the economy and
inflation outlook.
    "Since the market is widely expecting the Fed to raise
interest rates, the foreign exchange market reaction is likely
to come more from any signaling with regards to the future path
of monetary policy normalization," said Eric Viloria, senior
currency strategist at Wells Fargo in New York.
    Investors will also be watching for any fresh details on the
central bank's plans for trimming its balance sheet.
    Sterling        regained almost the whole of its losses from
Monday, rising 0.75 percent.
    Both the Japanese yen        and Swiss franc        were
flat.

 (Reporting by Dion Rabouin; editing by Grant McCool)
  

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