TORONTO, Sept 17 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as the Bank of Canada cut interest rates for the first time in six months and investors awaited a Federal Reserve policy decision.
The loonie was trading 0.2% lower at 1.3760 per U.S. dollar, or 72.67 U.S. cents, after moving in a range of 1.3738 to 1.3769. On Tuesday, the currency touched its strongest intraday level in two weeks at 1.3731.
The Bank of Canada reduced its key policy rate by 25 basis points to a three-year low of 2.5%, as expected, citing a weak jobs market and less concern about underlying pressures on inflation.
"The Bank of Canada dropped its previous forward guidance hinting at more cuts to come," Stephen Brown, deputy chief North America economist at Capital Economics, said in a note. "Nonetheless, Governor Tiff Macklem’s comments in the press conference support our view that the Bank will cut at least once more over its last two meetings of the year."
The overnight index swap market sees a roughly 40% chance of another cut in October. Chances of a move by December are seen at about 75%.
The U.S. dollar (.DXY), edged higher against a basket of major currencies, clawing back some recent declines. The Fed is also expected to resume its easing campaign, with the decision due at 2 p.m. ET.
The price of oil, one of Canada's major exports, was down 0.6% at $64.15 a barrel as investors assessed Russian supply risks.
Canadian bond yields edged higher across the curve. The 10-year was up one basis point at 3.168% after touching an earlier four-month low at 3.127%.
Reporting by Fergal Smith; Editing by Kirsten Donovan
