(Repeats to additional subscribers)
* Canadian dollar on defensive as oil prices fall further
* Euro gains on Reuters report ECB wary of more action
* Sterling awaits BOE's first policy review of 2016
By Jemima Kelly
LONDON, Jan 14 (Reuters) - Oil-rich Canada's dollar fell to
its lowest level since April 2003 on Thursday as crude prices
slid to their weakest in 12 years, fuelling speculation the Bank
of Canada could cut interest rates as early as next week.
Ahead of the Bank of England's latest monetary policy
meeting and interest rate decision, sterling hit an 11-month low
against the euro EURGBP=D4 of 75.77 pence.
The euro was up across the board on a Reuters report that
European Central Bank policy makers are sceptical about the need
for further policy action in the near term. EUR=
The loonie - traders' name for the Canadian dollar - fell to
C$1.4389 against its U.S. counterpart CAD=D4 as benchmark
brent crude hit a new 12-year low. Canadian heavy crude also
collapsed to around $15 a barrel this week, the lowest level
since the benchmark was introduced in 2004. O/R
"Negative oil price momentum is negative for Canada
generally, given that it's a major oil exporter, and also it
seems to have become the case that BOC rate expectations are
also linked directly to the oil price," said RBC Capital Markets
currency strategist Adam Cole.
"So the move in the currency is being compounded."
The market gave sterling a wide berth even though the
consensus is for the BOE to leave interest rates on hold at its
first monetary policy decision of the year on Thursday. It
traded at $1.4401 GBP=D4 , close to a 5-1/2-year low hit
earlier in the week.
Some investors suspect the central bank may sound more
dovish given the uncertain global backdrop. But given the fact
that sterling has fallen more than 5 percent since the last
meeting, easing some deflationary pressures, policymakers could
sound a more upbeat tone, which could provide the pound with
some respite.
"Policymakers are likely to refrain from sending significant
new signals until the February Inflation Report," wrote BNP
Paribas strategists in a note to clients. "One risk to the pound
is if the vote split changes from 8-1 to 9-0, but with rates
markets already priced for no tightening until well into 2017,
the impact should be limited."
The European Central Bank will also be publishing the
minutes from its December meeting 1230 GMT.
The euro rose half a percent to $1.0928 after the Reuters
report on the central bank's policy stance.
The dollar was flat against the yen at 117.655 JPY= , close
to a 4-1/2-month low hit earlier in the week.
The low-yielding Japanese currency tends to gain in times of
market stress as it is often used as a funding currency for
investment in risk assets, and consequently can rise when there
is a retreat from such assets.