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The Canadian dollar weakened to a near four-week low against the greenback on Wednesday after dovish comments by the Bank of Canada in a policy announcement prompted investors to raise bets on interest rate cuts in the coming months.

The central bank maintained its key overnight interest rate at 1.75 per cent as expected but opened the door to a possible cut should a recent slowdown in Canadian economic growth drag on.

“Rates are going to change at some point this year is what markets have taken out of it,” said Simon Harvey, FX market analyst for Monex Europe and Monex Canada. “You are seeing USD-CAD completely rally off the back of it.”

Chances of an interest rate cut at the central bank’s next rate decision on March 4 jumped above 20 per cent from less than 5 per cent before the policy decision.

Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins are due to hold a press conference at 11:15 ET.

At 10:51 a.m., the Canadian dollar was trading 0.4 per cent lower at 1.3132 to the greenback, or 76.15 U.S. cents. The currency, which climbed 5 per cent in 2019, touched its weakest intraday level since Dec. 27 at 1.3140.

Earlier in the day, data from Statistics Canada showed that Canada’s annual inflation rate held steady at 2.2 per cent in December, close to the Bank of Canada’s 2 per cent target, and wholesale trade fell for the third time in five months in November, declining 1.2 per cent.

The decline for the loonie on Wednesday came as the price of oil, one of Canada’s major exports, fell. U.S. crude oil futures were down 2.2 per cent at $57.08 a barrel.

Canadian government bond prices were higher across the yield curve, with the two-year price up 14 cents to yield 1.552 per cent and the 10-year rising 59 cents to yield 1.451 per cent.

The gap between Canada’s 2-year yield and its U.S. equivalent narrowed by 6.4 basis points to a spread of 2.6 basis points in favor of the Canadian bond.

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