* Canadian dollar at C$1.277
* The price of oil falls 1.6 percent
(Updates quotes, prices, news) NEW YORK, Feb 27 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday as the greenback rose on the release of testimony that showed new U.S. Federal Reserve Chairman Jerome Powell will continue on the gradual monetary rate path pursued by his predecessor Janet Yellen, and as Ottawa unveiled its federal budget. In his first public appearance as head of the U.S. central bank, Powell vowed to prevent the economy from overheating while sticking with a plan to gradually raise interest rates. He acknowledged the economy had strengthened recently, a remark that prompted investors to increase bets on four rate increases in 2018. "The Fed chairmans comments today have clearly opened the door to the possibility of a fourth rate increase over the course of 2018," said Shaun Osborne, chief FX strategist at Scotia Capital in Toronto.
At 4:06 p.m. ET (2106 GMT), the Canadian dollar was
trading at C$1.277 to the greenback. Canada's Liberal government tackled long-term growth challenges on Tuesday in a budget aimed at boosting women in the workforce and diversifying trade, while keeping its fiscal powder dry in case of an economic shock like the demise of NAFTA. Finance Minister Bill Morneau's budget outlined slight deficit improvements without much in the way of new spending, refusing to blink in the face of U.S. corporate tax cuts and trade uncertainty that strike fear into Canadian companies. U.S. trade officials are due to meet auto industry executives on Tuesday, Reuters reported, in a possible sign of increased discussion of automotive content requirements that have become a sticking point in efforts to rework the NAFTA trade deal. The loonie has weakened against the dollar in seven of the last eight sessions as the dollar has retraced some of its losses since it hit a three-year low on Feb. 16. The Bank of Canada is on course to raise interest rates twice more this year as it aims to strike a balance between a stronger economy and a number of economic risks, including trade negotiations and new housing regulations, a Reuters poll found.
The central bank has raised interest rates three times since last July, amid a robust job market and solid economic growth, but policymakers have said repeatedly they will be cautious in considering further hikes. Figures for Canada's fourth-quarter economic growth will be released on Friday, with analysts expecting the annualized rate will come in below the Bank of Canada's 2.5 percent forecast.
U.S. crude prices were down 1.6 percent at $62.91 a
(Reporting by Kate Duguid; Editing by Bill Trott and Lisa Shumaker)