Canadian dollar distances further off six-year low on weak US data

The Canadian dollar rose against the greenback on Wednesday as the Bank of Canada Governor Stephen Poloz said more rate cuts may not be needed to shore up Canadian growth, adding to the overnight gains after a negative data surprise in the US weekend the US currency.

Also, risk sentiment has improved after the Fed indicated that it will remain patient for longer before start hiking rates. The better than expected China PMI data that showed the manufacturing indicator unexpectedly moved to expansion territory also helped risk appetite weakening safe haven demand for the US dollar.

Federal Reserve Chair Janet Yellen suggested the Fed would not rush into raising interest rates, a reassuring signal for investors worried about a deteriorating global outlook, according to a Reuters report.

USD/CAD slipped to 1.2438 from the previous close of 1.2495 translating to a 0.46 % gain in the loonie which had risen 0.65% on the previous day, moving off a 13-day high.

The pair has been sideways with a slight downward bias after hitting a 6-year high of 1.2800 on 30 January.

US consumer confidence had fallen to 96.4 for February from 103.8 recorded for January, data showed on Tuesday, while the market was expecting a softer fall to 99.6.

Analysts said interest rate swaps market had been pricing in 80% chance of another rate cut by the Bank of Canada after the surprise 21 January move of 25 basis point cut to 0.75%, but comments made by Poloz later in the day in the UK have been a hawkish surprise.

"The downside risk insurance from the interest rate cut buys us some time to see how the economy actually responds," Poloz said in a speech at Western University in London, Ontario, while receiving his doctoral degree.

The China PMI rose to a 4-month high of 50.1 as per the preliminary data for February, up from 49.7 in January and against the market consensus of a drop to 49.5.

The manufacturing output index rose to a five-month high of 50.8, the Markit press release showed. The final data for February will be released on 2 March.