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Maybe one reason Bank of Canada Governor Stephen Poloz is happy not to talk down the Canadian dollar is because he won't have to. The slow path to interest rate increases that the central bank has been mapping out speaks louder to the market than any of his rhetoric could.

The central bank has effectively spent the past 10 days crystallizing the market's understanding of the bank's position on the dollar. On the one hand, Mr. Poloz used a speech last week to stress in no uncertain terms that he isn't in the business of jawboning the loonie lower, a perception that has dogged the former head of Export Development Canada pretty much from the moment he accepted the top job at the central bank. He's happy to let the market decide the currency's fate.

On the other hand, the monetary policy outlook described by two of his top deputies in subsequent speeches this week is a veritable welcome wagon for Canadian-dollar bears.

Senior deputy governor Carolyn Wilkins said that even once the Canadian economy returns to operating at full capacity and inflation stabilizes around the bank's 2-per-cent target, the bank might not be in a hurry to lift its policy interest rate to the so-called "neutral" level (which it believes to be between 3 and 4 per cent). Which was a bit jarring, because the neutral rate by definition is considered appropriate to maintain an economy at full capacity while keeping inflation in line.

"As long as factors leaning on growth persist, a policy rate below neutral would be required to maintain inflation sustainably at target," she said. In other words, even at full capacity, as long as there are headwinds buffeting Canada's growth, the Bank of Canada will see fit to lean against those headwinds with stimulative interest rates.

Two days later, deputy governor Timothy Lane elaborated on one of those headwinds: The U.S. Federal Reserve's gradual raising of its policy rate and unwinding of its quantitative-easing asset purchases, which will be the cornerstone of U.S. monetary policy over the next couple of years. Mr. Lane noted that the Fed's QE programs were also significantly stimulative for Canada's economy (by promoting growth in our biggest export market and by dampening Canadian bond-market interest rates) – and the removal of this stimulus is expected to have an opposite effect on Canada.

"The renormalization of U.S. monetary policy will act to tighten Canadian monetary and financial conditions," he said – essentially, the Fed's tightening will be like a mini-rate hike to the Canadian economy. He quickly added, "I want to stress that Canadian monetary policy is independent and can diverge from the Fed's policies."

So, far from the Bank of Canada feeling pressure to follow suit with U.S. rate hikes – something many observers have mused about – the bank is signalling that it expects to feel pressure to lean the other way.

It's a textbook rate-differential argument for traders to favour the U.S. dollar over its Canadian counterpart as these diverging monetary policies unfold. Granted, initially the Fed will be playing catch-up to the Bank of Canada – once it begins to raise rates (probably in the first half of next year), it will probably be up to six months before the U.S. policy rate is lifted from essentially zero to the Bank of Canada's 1 per cent. But for currency markets, the message is that, as rising rates make the U.S. dollar an investment draw, Canadian rates will certainly be losing relative ground – and for maybe longer than we previously thought.

The market appears to have taken the message to heart. The loonie has lost more than a penny against the greenback since Ms. Wilkins delivered her speech Monday, and on Thursday it dipped below 90 cents (U.S.) for the first time in six months.

By clearing the air about Mr. Poloz's perceived weak-dollar bias while spelling out its rate outlook in more detail, there is now an even more convincing case for a lower dollar. The bank doesn't need to be a cheerleader about a weaker currency, and traders won't need to read between the lines every time Mr. Poloz mentions the dollar. The bank is laying out a policy trajectory that all but dictates a market-driven decline in the loonie, regardless of how Mr. Poloz or anyone else feels about it.

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