CANADA FX DEBT-C$ dips ahead of Fed decision as oil prices fall

    * Canadian dollar at C$1.2867, or 77.72 U.S. cents
    * Oil prices fall 1.5 percent
    * Bond prices lower across the yield curve

    By Fergal Smith
    TORONTO, Dec 12 (Reuters) - The Canadian dollar slipped to
an 11-day low against its U.S. counterpart on Tuesday as oil
prices fell, while the greenback gained against a basket of
major currencies ahead of an expected interest rate hike by the
Federal Reserve.
    At 4 p.m. EST (2100 GMT), the Canadian dollar          was
trading at C$1.2867 to the greenback, or 77.72 U.S. cents, down
0.1 percent. It touched its weakest since Dec. 1 at C$1.2893.
    Still, the overall range was narrow for the fourth straight
day, as investors awaited the Fed decision on Wednesday and a
speech on Thursday by Bank of Canada Governor Stephen Poloz. 
    "Everybody is sitting on their hands until we get these risk
events out of the way," said Eric Theoret, currency strategist
at Scotiabank.
    The U.S. dollar        was boosted by data showing an
increase in wholesale inflation.                     
    The price of oil, one of Canada's major exports, retreated
on profit taking after prices surged earlier in the day on an
unplanned closure of the pipeline that carries the largest North
Sea crude oil grade.             
    U.S. crude futures        settled 1.5 percent lower at
$57.14 a barrel.
    Bank of Canada Governor Stephen Poloz is due to discuss the
issues that keep him awake at night in a speech on Thursday.
    The loonie had been pressured last week after the Bank of
Canada struck a more dovish tone than investors had expected as
it left its benchmark interest rate steady at 1 percent.  
    Canadian government bond prices were slightly lower across
the yield curve in sympathy with U.S. Treasuries. The two-year
           dipped 2 Canadian cents to yield 1.523 percent and
the 10-year             declined 4 Canadian cents to yield 1.867
    The gap between the two-year and 10-year yields narrowed by
0.7 of a basis point to +34.3 basis points, its narrowest since
January 2008.

 (Reporting by Fergal Smith; Editing by Tom Brown)