CANADA FX DEBT-C$ rallies as markets await Fed decision
* Canadian dollar at C$1.0970 or 91.16 U.S. cents * Bond prices mixed across the maturity curve (Adds details, quotes, updates prices) By Leah Schnurr TORONTO, Sept 16 (Reuters) - The Canadian dollar rallied against the greenback on Tuesday, pulling further away from a more than five-month low hit earlier in the week as investors yet again reassessed how close the United States is to raising interest rates. The currency market also took in comments on monetary policy at home, but the speech from Bank of Canada Governor Stephen Poloz did not elicit much reaction. Poloz said the central bank is not trying to manipulate the value of the currency, which gives it freedom not to match a possible rise in U.S. rates. Investors' main focus was on the Federal Reserve's two-day meeting, which will end with the release of a policy statement on Wednesday. Traders have been betting that the tone of the statement could turn more hawkish and signal a rate increase sooner rather than later. That took the loonie sharply lower last week as it broke through some key resistance levels. However, investors did an about-face on Tuesday after a report said the Fed was unlikely to change its dovish stance. "I think there is a fair bit of nervousness around the Fed," said Ken Wills, currency strategist and broker at CanadianForex in Toronto. "This has been built up over the last few weeks as it could be a real turning point." The Canadian dollar ended the North American session at C$1.0970 to the greenback, or 91.16 U.S. cents, stronger than Monday's close of C$1.1050, or 90.50 U.S. cents. The Canadian dollar started the day strong, even before the shifting Fed speculation, helped by data that showed factory sales jumped 2.5 percent in July, a much faster pace than expected. The loonie has seen some large swings in recent days, with a drop of nearly 2 percent last week. The currency fell all the way to C$1.11, but it was unable to push through that resistance barrier and has rallied since. That gives the Canadian dollar a wide range of C$1.0950 to C$1.11 depending on what the Fed does, said Wills. Canadian government bond prices were mixed across the maturity curve, with the two-year up half a Canadian cent to yield 1.000 percent and the benchmark 10-year down 5 Canadian cents to yield 2.243 percent. (Editing by Andre Grenon)
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