CANADA FX DEBT-C$ hits four-week high, then ends weaker as Fed holds
(Adds comment after Fed decision, updates prices) * Canadian dollar at C$1.3174, or 75.91 U.S. cents * Bond prices higher across the maturity curve By Alastair Sharp TORONTO, Sept 17 (Reuters) - The Canadian dollar surged to its strongest in four weeks before giving up the gains versus its U.S. counterpart on Thursday after the Federal Reserve held U.S. interest rates steady. In what amounted to a tactical retreat, the U.S. central bank said an array of global risks and other factors had convinced it to delay what would have been the first rate hike in nearly a decade. "If you take a look at the no move and the statement, the projections, we see a pretty dovish Fed," said Bipan Rai, director of foreign exchange strategy at CIBC World Markets. At one point the Canadian dollar hit C$1.3073, its strongest since Aug. 21, while its weakest level was C$1.3205. It ended the North American session trading hands at C$1.3174, or 75.91 U.S. cents, a tick weaker than Wednesday's close. Global markets had been split on whether the Fed had seen enough recovery to lift rates for the first time since 2006. Rai said the Fed decision had likely not swayed the Bank of Canada from its neutral stance after two rate cuts so far this year, but that its policymakers may note that global woes, not domestic slowdown, were the Fed's main worry. Taken as a whole, the latest Fed projections of slower GDP growth, low unemployment and still low inflation suggest that concerns of a so-called secular stagnation may be taking root among Fed policymakers. Canadian government bond prices gained along the maturity curve. The two-year added 7 Canadian cents to yield 0.491 percent and the benchmark 10-year added 44 Canadian cents to yield 1.547 percent. The Canadian currency fell against the euro, the Swiss franc and the British pound but gained on fellow commodity currencies including the Australian and New Zealand dollars. The price of oil, to which the loonie is typically sensitive due to Canada's position as a major exporter of the commodity, was little changed, with U.S. crude prices up 0.6 percent to $47.42 a barrel and Brent crude flat at $49.73. (Editing by W Simon and James Dalgleish)
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