CANADA FX DEBT-C$ strengthens to near 2-week high as risk appetite rises

* Canadian dollar at C$1.3018, or 76.82 U.S. cents
    * Loonie hits strongest since Sept. 9 at C$1.3000
    * Bond prices higher across flatter yield curve
    * 10-yr yield hits lowest since Sept. 9 at 1.097 pct

    TORONTO, Sept 22 (Reuters) - The Canadian dollar
strengthened to a nearly two-week high against its U.S.
counterpart on Thursday as risk appetite picked up one day after
the U.S. Federal Reserve decided to keep interest rates
    The Fed on Wednesday signaled an increasingly cautious
approach to future U.S. rate increases, sparking a rally in
world shares and bonds. 
    "Fed-induced risk appetite" drove strength in
growth-sensitive currencies such as the Canadian dollar, said a
research note from Scotiabank.
    Oil rose for a second day as a weaker U.S. dollar and
a surprisingly large drop in U.S. crude inventories emboldened
investors ahead of next week's meeting of OPEC members and
Russia to discuss supply. U.S. crude prices were up 2.03
percent at $46.26 a barrel.
    At 9:15 a.m. EDT (1315 GMT), the Canadian dollar 
was trading at C$1.3018 to the greenback, or 76.82 U.S. cents,
stronger than Wednesday's close of C$1.3107, or 76.30 U.S.
    The currency's weakest level of the session was C$1.3104,
while it touched its strongest since Sept. 9 at C$1.3000.
    It was the fourth straight day the loonie gained ground
against the greenback after having hit its lowest in seven weeks
at C$1.3248 on Friday.
    Canadian government bond prices were higher across a flatter
yield curve in sympathy with U.S. Treasuries. The two-year
 bond firmed 1 Canadian cent to yield 0.571 percent
and the benchmark 10-year rose 30 Canadian cents to
yield 1.115 percent.
    The 10-year yield touched its lowest since Sept. 9 at 1.097
percent, while the spread between the 2-year and 10-year yields
narrowed by 2.8 basis points to 54.4 basis points, indicating
outperformance for longer-dated maturities.
    Canadian inflation and retail sales data are due on Friday.
The annual inflation rate is forecast to have edged up to 1.4
percent in August, while investors will be looking for signs
that the federal government's new child benefit payments boosted
retail sales.    

 (Reporting by Fergal Smith; Editing by Bernadette Baum)