CANADA FX DEBT-C$ flat as investors look ahead to Fed meeting

December 13, 2013

* Canadian dollar at C$1.0640 or 93.98 U.S. cents * Bond prices higher across the maturity curve * Fed meeting in view next week By Leah Schnurr TORONTO, Dec 13 (Reuters) - The Canadian dollar was flat against the greenback on Friday, with the currency expected to stick to a trading range as investors were wary of taking large bets ahead of next week's Federal Reserve policy-setting meeting.

Investors were also continuing to parse Thursday's comments from Bank of Canada Governor Stephen Poloz, who said the central bank is likely to keep interest rates on hold "for quite some time," dampening talk that it was edging closer to cutting rates in order to combat low inflation.

The perception that the Bank of Canada is becoming more dovish has weighed on the loonie since late October when the central bank dropped its long-held rate hike bias. Since then, the Canadian currency has lost more than 3 percent.

Poloz on Thursday called that policy change a shift to honesty rather than dovishness.

"All in all, the Bank of Canada's view is fairly contained and neutral in retrospect," said Dean Popplewell, chief currency strategist at OANDA in Toronto.

The Canadian dollar was at C$1.0640 to the greenback, or 93.98 U.S. cents, unchanged from Thursday's close.

Markets will remain fixated on what the Fed will decide to do at its two-day meeting next week, which runs from Dec. 17-18. Investors are trying to gauge whether the central bank will start to scale back its bond purchases next week or hold off until the new year.

Recent stronger-than-expected economic data and a budget deal in Washington have increased speculation tapering could get under way next week. The Fed is currently buying $85 billion in bonds a month, which has been a major driver of global markets this year.

A faster timetable for the Fed is seen as a negative for the Canadian dollar as the move is expected to reduce risk appetite and benefit the U.S. currency.

Canadian government bond prices were up across the maturity curve, with the two-year up half a Canadian cent to yield 1.097 percent and the benchmark 10-year up 16 Canadian cents to yield 2.646 percent.