* C$ ends higher at 94.30 U.S. cents
* Fed keeps rates near zero, voices some optimism
* BoC downplays talk of a housing bubble (Updates to close, additional comment)
By Ka Yan Ng
TORONTO, Dec 16 (Reuters) - The Canadian dollar finished slightly higher against the U.S. currency on Wednesday after market players digested news that the U.S. Federal Reserve kept interest rates near zero, while the Bank of Canada downplayed talk of a housing bubble.
The Fed rate decision and a speech by Bank of Canada Governor Mark Carney were the events of the session, but neither managed to sway the Canadian dollar out of its recent ranges.
The Fed voiced guarded optimism that the battered U.S. job market was improving, but it repeated a vow to keep interest rates extraordinarily low for "an extended period," prompting a short-lived boost to the U.S. currency against the Canadian unit. [ID:nN16119711]
In a speech addressing concerns about an overheating housing market, Carney repeated that Canadian household debt has risen sharply relative to income but said the risks to the financial system are small and do not warrant an early interest rate hike by the bank. [ID:nN1697463]
"There was not a whole lot of reaction for either him or the (Fed). We're still stuck in a range for Canada," said Shaun Osborne, chief currency strategist at TD Securities.
"The data tomorrow could still have some impact but it seems as if we are just going to drift into the end of the week stuck in a bit of a range here."
The Canadian dollar finished at C$1.0605 to the U.S. dollar, or 94.30 U.S. cents, up slightly from C$1.0614 to the U.S. dollar, or 94.22 U.S. cents, at Tuesday's close.
The currency was at its firmest, at 94.60 U.S. cents, soon after data showed Canadian manufacturing sales rose twice as much as expected in October from September, jumping 2 percent on strength in the aerospace, energy and auto industries. [ID:nN163200]
Canada's consumer price index for November and the U.S. Philadelphia Federal Reserve Bank's manufacturing index are some of the key economic reports markets are set to absorb on Thursday.
Despite easing in the 12 months to November, Canadian core inflation appears to be a little firmer than the Bank of Canada's 1.4 percent projection for the fourth quarter, raising expectations that interest rate hikes expected for later next year could be aggressive. Core inflation, which strips out volatile items like gasoline prices, is seen easing. [ID:nN15226161]
Canadian short-term bonds were lower, partly because stock markets held strong gains, suggesting risk appetite was up.
Toronto's main stock index hit its loftiest level in nearly two weeks on Wednesday en route to a higher close. [.TO]
The two-year government bond CA2YT=RR was down 7 Canadian cents at C$99.86 to yield 1.323 percent, while the 10-year bond CA10YT=RR was up 9 Canadian cents at C$102.86 to yield 3.394 percent.
Canadian bonds put in mixed performance against U.S. treasuries, with the 10-year yield spread widening to 20.2 basis points below its U.S. counterpart from 18.9 basis points in the previous session. (Editing by Rob Wilson)