By Fergal Smith
TORONTO (Reuters) - The Canadian dollar weakened to a near two-week low against the greenback on Wednesday as investors raised bets on a Bank of Canada interest rate cut next year after the central bank expressed more concern about global trade uncertainty.
The Bank of Canada maintained its key overnight interest rate at 1.75% as expected but cut domestic and global growth forecasts, saying the Canadian economy would be increasingly tested by trade conflicts.
"The loonie has sold off post-statement due to the fact that the BoC is beginning to witness the effects of external headwinds on the Canadian economy," said Simon Harvey, FX market analyst for Monex Europe and Monex Canada.
"While this won't be enough to move the needle for a December rate cut in our view, it does fuel expectations of a Q1 2020 insurance rate cut," Harvey said.
Chances of an interest rate cut by the end of next year jumped to more than 80% from about 45% before the rate decision, data from the overnight index swaps market showed.
Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins are due to hold a news conference at 11:15 a.m. (1515 GMT).
The U.S. Federal Reserve will announce its interest rate decision later in the day. It is expected to ease for the third time since July, which would lower the range for its policy rate to below the Bank of Canada's equivalent rate for the first time since December 2016.
At 10:37 a.m. (1437 GMT), the Canadian dollar was trading 0.5% lower at 1.3154 to the greenback, or 76.02 U.S. cents. The currency hit its weakest intraday level since Oct. 17 at 1.3158.
Meanwhile, the U.S. dollar (DXY) rose against a basket of major currencies after data showed that American economic growth slowed less than expected in the third quarter.
U.S. crude oil futures (CLc1) fell 0.8% to %55.09 a barrel, pressured by worries about a possible delay in resolving the U.S.-China trade war. Oil is one of Canada's major exports.
Canadian government bond prices were higher across the yield curve, with the two-year (CA2YT=RR) up 18 Canadian cents to yield 1.615% and the 10-year (CA10YT=RR) rising 77 Canadian cents to yield 1.518%.
On Monday, the 10-year yield touched its highest intraday level since July 16 at 1.628%.