CANADA FX DEBT-C$ stronger as Fed hints on hiking rates
* Canadian dollar at C$1.0850 or 92.17 U.S. cents * Bond prices higher across the maturity curve (Adds strategist comment, updates after Fed policy news) By Alastair Sharp TORONTO, June 18 (Reuters) - The Canadian dollar gained ground on the greenback on Wednesday as the U.S. Federal Reserve hinted at a slightly faster pace of interest rate hikes starting next year and slowed its stimulus efforts. "For Canada, the takeaway is likely that they still see a fairly robust outlook for U.S. economic growth and for Canada that is fairly positive," said Camilla Sutton, chief currency strategist at Scotiabank. The Fed slashed its forecast for 2014 U.S. growth but said the recovery was on track and it should be able to raise rates in 2015. It also lowered the amount of bond-buying it will make to stimulate growth to $35 billion per month, from $45 billion currently. The loonie, as Canada's currency is colloquially known, gained roughly a quarter of a cent post-Fed news, notwithstanding some initially volatile trading. It ended the session trading at C$1.0850 to the U.S. dollar, or 92.17 U.S. cents, stronger than Tuesday's close of C$1.0864, or 92.05 U.S. cents. Data showing Canadian wholesale prices rose twice as fast as expected in April had no noticeable impact ahead of the Fed release. The currency has traded in a narrow band over the past week but could accelerate its losses if it crosses resistance at C$1.0880, or 91.91 U.S. cents, said Greg Moore, senior currency strategist at Royal Bank of Canada in Toronto. Looking past the Fed, Canadian market watchers will be waiting for domestic inflation and retail sales data due on Friday for any signs of price pressures that could prompt the Bank of Canada to revise its own take on rates. Currently, market players don't expect a rate hike until well into 2015. "For us, we'd have to see more evidence of the U.S. recovery flowing into Canada," Scotia's Sutton said. "Inflation is essentially at target but Governor Poloz is very quick to highlight the potential downside risk." Canadian government bond prices were higher across the maturity curve, with the two-year up 28 Canadian cents to yield 1.098 percent and the benchmark 10-year up 41 Canadian cents to yield 2.268 percent. (Additional reporting by Cameron French; Editing by James Dalgleish and Chris Reese)
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