CANADA FX DEBT-C$ inches higher ahead of Fed rate decision
(Adds strategist comment, details, closing figures) * Canadian dollar at C$1.3247, or 75.49 U.S. cents * Bond prices lower across the maturity curve By Solarina Ho TORONTO, Sept 15 (Reuters) - The Canadian dollar eked out a small gain against its U.S. counterpart on Tuesday, as stronger crude prices provided support, but investors were mostly reluctant to make big bets ahead of a decision on interest rates by the Federal Reserve on Thursday. The loonie was stronger against most of its counterparts, but gains were tempered by a stronger greenback, which rose alongside U.S. equities following solid retail sales data for August, indicating robust domestic demand that could persuade the Fed to raise rates. The Fed is due to make its next rate decision Thursday and market participants are divided on whether the central bank will hike rates or delay such a move until later in the year or 2016. "The event risk is just too significant to not pay attention to," said Brad Schruder, director of foreign exchange at BMO Capital Markets. The Canadian dollar finished trading at C$1.3247 to the greenback, or 75.49 U.S. cents, marginally firmer than the Bank of Canada's official close on Monday at C$1.3257, or 75.43 U.S. cents. The currency traded between C$1.3227 and C$1.3272. Schruder said the question is not necessarily whether the Fed hikes, but how much is priced in and what will happen next, particularly to currencies, equities, fixed income and other asset prices. "Does it imply market conditions globally aren't as bad as everyone thinks and the Fed is leading the way? Does it imply that the Fed is giving more weight to domestic issues rather than global? What does it say about the Fed's longer term plans with respect to the psychological impact this has on markets?" said Schruder. U.S. crude settled up more than 1 percent, buoyed by gains on Wall Street and higher gasoline prices. U.S. crude's front-month settled up 59 cents, or 1.3 percent, at $44.59 a barrel. Canadian government bond prices were lower across the maturity curve, with the two-year price down 8 Canadian cents to yield 0.500 percent, its highest yield since early summer and the benchmark 10-year falling 93 Canadian cents to yield 1.573 percent. The Canada-U.S. two-year bond spread widened to -31.1 basis points, while the 10-year spread widened to -71.7 basis points. (Reporting by Solarina Ho; Editing by Bernadette Baum and James Dalgleish)
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