Canadian Dollar Gains As BoC Governor Douses Rate Cut Speculation

The Canadian dollar advanced against most major currencies in the Asian session on Wednesday after Bank of Canada Governor Stephen Poloz signaled that bank may not cut interest rates yet again next week.

Speaking at an event in London, Ontario, on Tuesday, Poloz said that last month's rate cut will buy the bank some time to assess the economic impacts of the plunge in oil prices.

"The oil-price shock is an important setback in our progress toward full capacity, full employment and stable inflation because it is a net negative for economic growth," Poloz said.

He said that the bank has been setting policy with a view to balance the risks facing both the outlook for returning inflation sustainably to its target, and the risks to financial stability such as those posed by the indebtedness of Canadian households.

Last month's rate cut was intended to take out some insurance against both sets of risks, he said.

At the semi-annual monetary policy testimony before the Senate Banking Committee on Tuesday, U.S. Federal Reserve chair Janet Yellen indicated that the Fed is not likely to begin raising interest rates in at least the next couple of monetary policy meetings.

Meanwhile, the Asian stock markets are advancing amid the increase in risk appetite. Crude oil prices are also higher. Crude oil for April delivery is currently up $0.01 to $49.29 a barrel.

Greece's package of proposed economic reforms to euro group was approved by its euro zone creditors on Tuesday, securing an extension of its financial lifeline of bailout for another four months.

Tuesday, the Canadian dollar rose 0.25 percent against the yen, 0.66 percent against the U.S. dollar and 0.61 percent against the euro.

In the Asian trading today, the Canadian dollar rose to 5-day highs of 1.2458 against the U.S. dollar and 1.4132 against the euro, from yesterday's closing quotes of 1.2484 and 1.4158, respectively. If the loonie extends its uptrend, it is likely to find resistance around 1.20 against the greenback and 1.37 against the euro.

Against the yen, the loonie advanced to a 5-day high of 95.29. On the upside, 97.20 is seen as the next resistance level for the loonie. Looking ahead, Swiss UBS consumption indicator for January is due to be released at 2:00 am ET.

U.K. BBA mortgage approvals for January is also set to be published later on in the session.

At 5:00 am ET, Bank of England Governor Mark Carney is scheduled to launch a new research agenda for the central bank in London.

In the New York session, U.S. new home sales for January is due.

At 10:00 am ET, Yellen is due to testify before the House Financial Services Committee in Washington D.C.

Subsequently, European Central Bank President Mario Draghi will take part in a plenary debate on the ECB's Annual Report 2013 at the European Parliament in Brussels at 11:30 am ET.