CANADA FX DEBT-C$ flat ahead of Fed decision; oil prices extend losses

* Canadian dollar at C$1.2785 or 78.22 U.S. cents
    * Bond prices mostly higher across the maturity curve

    By Solarina Ho
    TORONTO, March 17 (Reuters) - The Canadian dollar was mostly
flat against its U.S. counterpart on Tuesday despite a further
slide in crude prices, as investors looked ahead to the U.S.
Federal Reserve's latest monetary policy decision and guidance.
    Brent crude prices traded at their lowest level since early
February, while U.S. crude hovered just above the six-year lows
touched on Monday, as worries over an increasing supply glut
grew. Canada is a major oil exporter, and the economy has been
feeling the effects of the dramatic price plunge. 
    The U.S. dollar fell broadly on concerns that the currency's
recent surge could prompt the Fed to take a more cautious stance
on interest rate hikes this year. The market has been widely
expecting the U.S. central bank to hike rates this summer or
fall, which would mark a clear divergence from many other
central banks around the world. 
    "There's certainly an element of people being quite happy to
sit on their hands collectively ahead of that Fed statement
tomorrow and the subsequent press briefing and projections,"
said Jeremy Stretch, head of foreign exchange strategy at CIBC
World Markets in London.
    "That's clearly the dominant factor overarching everything
else in the current environment."
    At 9:28 a.m. (1328 GMT), the Canadian dollar was
trading at C$1.2785 to the greenback, or 78.22 U.S. cents,
little changed from Monday's close of C$1.2780, or 78.25 U.S.
    Stretch said that while the currency is headed for more
weakness, it will likely be a slow grind toward the C$1.30
    Earlier, data showed Canadian manufacturing sales fell more
than anticipated in January, hit by a drop in petroleum and coal
product sales. The industry has seen sales fall 35 percent in
the last seven months alongside the fall in crude prices.
    Looking ahead, Canadian retail sales for January and
inflation data for February due on Friday will be the next key
economic data that could provide further direction for the
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year up half a
Canadian cent to yield 0.530 percent and the benchmark 10-year
 rising 10 Canadian cents to yield 1.421 percent.

 (Editing by Jonathan Oatis)