CANADA FX DEBT-Loonie flat as investors hope for Washington resolution

* C$ at C$1.0394 vs US$, or 96.21 U.S. cents
    * Investors await resolution on U.S. budget impasse
    * Bond prices lower across the curve

    By Leah Schnurr
    TORONTO, Oct 10 (Reuters) - The Canadian dollar was little
changed against the greenback on Thursday amid signs U.S.
lawmakers were making progress on a fiscal showdown that has had
markets fretting over the possibility of a U.S. default.
    According to a Republican leadership aide, U.S. House of
Representatives Republicans are considering agreeing to a
short-term increase in the government's borrowing authority to
buy time for negotiations on broader policy measures.
    A budget impasse in Washington has led to a partial
government shutdown, now in its tenth day, and is bringing
lawmakers closer to a separate and more crucial mid-October
deadline to raise the debt ceiling to avoid a potential default.
    While it was unclear how long the duration of a short-term
increase would be, it would at least stave off a default.    
Investors are also concerned that the government shutdown will
start to bite into economic growth, which could hurt Canada, the
largest trading partner with the United States.
    "The events as they unfold in Washington have really in many
respects been the major control over what's happening in the
foreign exchange landscape," said Jack Spitz, managing director
of foreign exchange at National Bank Financial in Toronto.
    While the loonie tends to be less volatile than other G10
currencies, an agreement to temporarily raise the debt ceiling
would be seen as positive for the risk outlook and would likely
lead to a strengthening of the Canadian dollar, said Spitz.
    Without an agreement in hand, however, the Canadian dollar
 was unchanged on Thursday morning at the previous
session's closing level of C$1.0394, or 96.21 U.S. cents, after
three days in a row of declines. 
    At home, data showed prices for new homes in Canada remained
tame in August, rising just 0.1 percent. 
    Prices for Canadian government bonds were lower across the
maturity curve. The two-year bond slipped 2-1/2
Canadian cents to yield 1.211 percent, while the benchmark
10-year bond fell 30 Canadian cents to yield 2.613