CANADA FX DEBT-C$ strengthens ahead of Fed decision as oil rallies
* Canadian dollar at C$1.3462, or 74.28 U.S. cents * Bond prices higher across the yield curve TORONTO, March 15 (Reuters) - The Canadian dollar strengthened on Wednesday against its U.S. counterpart as oil prices rallied, but gains for the loonie were restrained ahead of a potential Federal Reserve interest rate hike. U.S. crude prices were up 1.34 percent at $48.36 a barrel, lifted by a surprise drawdown in U.S. inventories and data from the International Energy Agency suggesting Organization of the Petroleum Exporting Countries cuts should create a crude deficit in the first half of 2017. Oil is one of Canada's major exports. The Fed is expected to raise interest rates for the second time in three months later on Wednesday, encouraged by strong monthly job gains and confidence that inflation is finally rising to its target. At 10:01 a.m. ET (1401 GMT), the Canadian dollar was trading at C$1.3462 to the greenback, or 74.28 U.S. cents, stronger than Tuesday's close of C$1.3485, or 74.16 U.S. The currency's strongest level of the session was C$1.3443, while its weakest was C$1.3484. In domestic data, household debt as a share of income rose to a fresh record in the fourth quarter, data from Statistics Canada showed in a report likely to underscore concerns consumers are becoming overly indebted. Canadian government bond prices were higher across the yield curve, with the two-year up 1.5 Canadian cents to yield 0.847 percent and the 10-year rising 11 Canadian cents to yield 1.822 percent. The 2-year yield fell 2 basis points further below its U.S. equivalent to a spread of -54.6 basis points. Earlier in March, it had touched its widest gap since January 2016 at -55.2 basis points. (Reporting by Fergal Smith; Editing by Nick Zieminski)
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