×

CANADA FX DEBT-C$ near flat as bond yields firm ahead of Fed decision

* Canadian dollar at C$1.2196, or 81.99 U.S. cents

* Bond prices lower across the yield curve

* 10-year yield touches a nearly 3-year high at 2.119 percent

TORONTO, Sept 18 (Reuters) - The Canadian dollar was nearly unchanged on Monday against its U.S. counterpart as both domestic and U.S. bond yields firmed ahead of a Federal Reserve policy decision this week. The Fed is set on Wednesday to announce the start of a plan to trim its $4.5-trillion portfolio of assets. Investors will also be looking for clues on whether interest rates could rise again by year-end. The market is also awaiting some top-tier Canadian data this week.

At 9:36 a.m. ET (1336 GMT), the Canadian dollar was

nearly unchanged at C$1.2196 to the greenback, or 81.99 U.S. cents. The currency traded in a range of C$1.2173 to C$1.2215. The loonie has pulled back from a two-year peak earlier this month at C$1.2063 as the boost from recent Bank of Canada interest rate increases has faded. The central bank raised rates in July, for the first time in nearly seven years, and again this month. Its policy rate sits at 1 percent. Chances of a another rate hike in October have crept up to nearly 50 percent from around 30 percent after mixed domestic jobs data earlier in September, as reflected by the overnight index swaps market. It comes as data last week showing an acceleration in U.S. inflation revived bets the Fed would raise interest rates at its December meeting. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as easing tensions on the

Korean peninsula boosted stocks. The two-year dipped

2.5 Canadian cents to yield 1.614 percent, and the 10-year fell 20 Canadian cents to yield 2.115 percent. Earlier in the session, the 10-year yield touched its highest since October 2014 at 2.119 percent. Foreign investors resumed their purchases of Canadian securities in July following a divestment in the previous month, led by a record acquisition of bonds, data from Statistics Canada showed. Canada's manufacturing sales and wholesale trade data for July are due on Tuesday and Thursday, respectively. The August inflation report and retail sales data for July are due on Friday. Prices of oil, one of Canada's major exports, slipped below $50 per barrel but stayed close to multimonth highs amid a drop in shale drilling and as refineries continued to restart after Hurricane Harvey.

U.S. crude prices were down 0.36 percent at $49.71 a

barrel.

(Reporting by Fergal Smith; Editing by W Simon)