CANADA FX DEBT-"Stretched" Canadian dollar eases after rally
* C$ at C$0.9742 vs US$, or $1.0265 * Bond prices fall across the curve By Claire Sibonney TORONTO, Sept 12 (Reuters) - The Canadian dollar paused after a four-day rally versus its U.S. counterpart on Wednesday, with little reaction to the ruling by Germany's top court allowing the euro zone's new bailout fund to go ahead as attention turned to the start of the U.S. Federal Reserve's two-day policy meeting. The Fed looks set to announce a third round of bond purchases after the meeting of the Federal Open Market Committee ends on Thursday, as it tries to drive borrowing costs lower and breathe more life into an economy that is not growing fast enough to reduce unemployment. The Canadian dollar hit a 13-month high on Tuesday on expectations of more stimulus by the Fed, which is seen weighing on the U.S. dollar against higher-yielding currencies such as Canada's. "Canada is stretched a little here. We're really the only currency trading at its 13-month highs, and so I think the others are playing catch-up maybe, and Canada is just waiting for the next catalyst," said Camilla Sutton, chief currency strategist at Scotiabank. "We're totally happy to ignore yesterday's absolutely miserable trade balance data and now waiting for FOMC tomorrow," she added. Canada on Tuesday reported that its trade deficit hit a record high in July. At 8 a.m. (1200 GMT), the Canadian dollar was at C$0.9742 versus the greenback, or $1.0265, slightly weaker than Tuesday's finish at C$0.9732 to the U.S. dollar, or $1.0275. Sutton pegged the day's range for the Canadian dollar between C$0.9702-C$0.9766. Elsewhere, Germany's Constitutional Court gave a green light for the country to ratify the euro zone's new bailout fund. Approval of the rescue package is crucial to boosting the euro zone's crisis fighting powers and a key requirement for the European Central Bank's new plan to buy the bonds of struggling euro members. Canadian government bond prices retreated across the curve, with the two-year bond down 4 Canadian cents to yield 1.194 percent and the benchmark 10-year bond falling 42 Canadian cents, yielding 1.900 percent.
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