CANADA FX DEBT-C$ strengthens as Fed minutes sideswipe U.S. dollar
* Canadian dollar at C$1.1104, or 90.06 U.S. cents * U.S. dollar weakens on dovish Fed minutes * Bond prices mostly higher across the maturity curve (Updates to close) By Andrea Hopkins TORONTO, Oct 8 (Reuters) - The Canadian dollar strengthened nearly 1 percent against the U.S. dollar on Wednesday after minutes of the latest Federal Reserve policy meeting focused on the downside risks to the U.S. economy. The U.S. dollar lost ground against the Canadian currency, fell to a two-week low against the euro and trimmed gains versus the yen following the release of the dovish Fed minutes. "We had our big rally today, we started quite weak and now we've rallied almost a full percent, and that's really just a reaction to the Fed minutes," said Camilla Sutton, chief currency strategist at Scotiabank. "Traders have used it as a reason for profit taking on long U.S. dollar positions and the market was already fairly nervous." In minutes that suggested the U.S. central bank could take its time in raising interest rates, the Fed said a strong dollar could hurt some parts of the economy and slow the rise of inflation. The Canadian dollar ended the North American session at C$1.1104 to the greenback, or 90.06 U.S. cents, up from Tuesday's close at C$1.1171, or 89.52 U.S. cents. Domestically, Canadian housing starts rose in September, while the previous month was also revised slightly higher, according to a report from the Canada Mortgage and Housing Corp. Economists said the figures were broadly in line with forecasts, despite some concerns they could come in below expectations following Tuesday's disappointing building permits data. Sutton said investors are likely to see a period of stabilization of the U.S. dollar until it can find a new catalyst in economic data to give it back some strength. "For Canada, we get employment data on Friday, but really the U.S. data that is going to prove particularly important is anything that gives us a hint on inflation or employment," Sutton said. Canadian government bond prices were mostly higher across the maturity curve, with the two-year up 6 Canadian cents to yield 1.053 percent and the benchmark 10-year adding 15 Canadian cents to yield 2.012 percent. (Additional reporting by Solarina Ho; Editing by Chizu Nomiyama and James Dalgleish)
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