CANADA FX DEBT-C$ strengthens ahead of Fed decision as oil prices climb

    * Canadian dollar at C$1.2257, or 81.59 U.S. cents
    * Bond prices little changed across the yield curve
    * Oil prices climb more than 1 percent

    TORONTO, Sept 20 (Reuters) - The Canadian dollar
strengthened on Wednesday against its U.S. counterpart, boosted
by higher oil prices as investors awaited an interest rate
decision by the U.S. Federal Reserve.
    Prices of oil, one of Canada's major exports, were on course
for their largest third-quarter gain in 13 years after the Iraqi
oil minister said that OPEC and its partners were considering
extending or deepening output cuts.             
    U.S. crude        prices were up 1.07 percent to $50.01 a
    Against a basket of currencies, the U.S. dollar        edged
towards 2-1/2-year lows hit earlier this month as investors
waited to see whether the Fed this afternoon would signal
tighter monetary policy or hold off because of tepid inflation
    At 9:28 a.m. ET (1328 GMT), the Canadian dollar          was
trading at C$1.2257 to the greenback, or 81.59 U.S. cents, up
0.3 percent.
    The currency traded in a range of C$1.2236 to C$1.2302.
    On Monday, the loonie touched its weakest in nearly two
weeks at C$1.2338 after a Bank of Canada policymaker said the
currency's strength will be a factor in future interest rate
    Canadian government bond prices were little changed across
the yield curve, with the two-year            flat to yield
1.558 percent and the 10-year             rising 1 Canadian cent
to yield 2.093 percent.
    The 10-year yield on Monday touched a nearly three-year high
at 2.119 percent.    
    Canada's August inflation report and retail sales data for
July are due on Friday.

 (Reporting by Fergal Smith; Editing by W Simon)