* Slips to 93.84 U.S. cents
* Bond prices firm on safety bid
By Ka Yan Ng
TORONTO, Jan 27 (Reuters) - The Canadian dollar was softer against the U.S. dollar on Wednesday, though off session lows, as mixed commodity and equity markets provided little direction and investors were reluctant to make big bets ahead of an interest rate decision by the U.S. Federal Reserve.
The price for oil, a key Canadian export, was little changed at around $74.85 a barrel [O/R], while gold prices were slightly lower. [GOL/]
Global stock markets fell on Wednesday, hitting their lowest levels in two months as investors fretted about a monetary squeeze by central banks around the world and also the impact of tighter U.S. banking regulation. [MKTS/GLOB]
At 12:13 p.m. (1713 GMT), the Canadian dollar was at C$1.0656 to the U.S. dollar, or 93.84 U.S. cents, down slightly from Tuesday's finish at C$1.0625 to the U.S. dollar, or 94.12 U.S. cent. Earlier, the currency had fallen as low as 93.65 U.S. cents.
Market watchers said the policy and political landscape would likely keep investors cautious, and could put some spring into the U.S. dollar as risk aversion rises, to the detriment of the Canadian dollar.
The Fed is widely expected to leave its key interest rates near zero, but investors will watch for any change in the accompanying statement on the economic outlook, or on when rates might rise. Questions are also overhanging whether Ben Bernanke will win a second term as chairman of the U.S. central bank. [ID:nN27180815]
"The big interesting question is less over this meeting and more over who's going to be in the chairman's chair ... It looks like it'll probably be Bernanke but it still indicates a clear tension between Congress and the Fed," said David Watt, senior currency strategist at RBC Capital Markets.
"We've already got a lot of nervousness in markets and it could just feed into that, which actually could turn out being U.S. dollar bullish so that could push dollar/Cad somewhat higher."
U.S. President Barack Obama's State of the Union address on Wednesday evening will also be closely watched.
Government bond prices were firm across the curve, catching a safe haven bid in the wake of jitters over Greece's fiscal health [ID:nLDE60Q0Y4] and an unexpected drop in U.S. new home sales.
Sales of new homes fell 7.6 percent in December, although November sales were revised to a stronger number than initially reported, according to U.S. data. [ID:nCAT005052]
Investors were also waiting for the outcome of the Federal Reserve's interest-rate meeting and an $42 billion auction of five-year U.S. paper.
In Canada, an auction of two-year bonds due 2012 yielded an average 1.301 percent. [ID:nTOR007129] [CA/AUC]
The two-year bond CA2YT=RR was up 2 Canadian cents at C$100.17 to yield 1.159 percent, while the 30-year bond CA30YT=RR rose 68 Canadian cents to C$117.70 to yield 3.937 percent. (Additional reporting by Jennifer Kwan; editing by Rob Wilson)