* C$ at C$1.3228, or 75.60 U.S. cents
* Bond prices mostly lower across maturity curve
(Updates prices, adds quotes)
By Leah Schnurr
OTTAWA, Sept 10 (Reuters) - The Canadian dollar firmed
against the greenback on Thursday, lifted by higher oil prices,
although the strength was not expected to last as investors try
to gauge whether the U.S. central bank will hike interest rates
as early as next week.
The loonie is down nearly 14 percent for the year so far,
but it has traded largely sideways in recent weeks despite some
big day-to-day swings.
After the Bank of Canada held interest rates steady on
Wednesday, as expected, attention is turning to next week's rate
decision from the U.S. Federal Reserve, which could raise rates
for the first time in nearly a decade. FED/R
Whether a rate hike comes next week or later in the year,
the Canadian dollar is likely to weaken as investors favor the
U.S. dollar, said Ken Wills, CanadianForex's Head of Corporate
Exchange North America.
But once the rate increase is out of the way, the loonie
could bounce back to the C$1.31 or C$1.3080 levels, he said.
"I'm anticipating over the fall, whether they do it in
September or October, we could be looking at a pretty good
scenario where it's sell the rumor, buy the fact," Wills said.
But for Thursday's session, a 4 percent increase in the
price of oil gave the loonie some support.
The Canadian dollar CAD=D4 ended the North American
trading session at C$1.3228 to the greenback, or 75.60 U.S.
cents, compared with the Bank of Canada's official Wednesday
close of C$1.3250, or 75.47 U.S. cents.
The currency had briefly touched $1.3179 on the oil rally,
but pared gains near the end of the session alongside U.S.
equities, which also gave up some of their early gains.
"The market went back to buying USD/CAD on risk aversion.
Two variables have surged in how they drive USD/CAD - one of
them is risk appetite ... The other is oil," said Greg Anderson,
global head of foreign exchange strategy with BMO Capital
Markets in New York.
U.S. crude CLc1 settled up $1.77 at $45.92 a barrel. O/R
Canadian government bond prices were mostly lower across the
maturity curve, with the two-year CA2YT=RR price down 2
Canadian cents to yield 0.467 percent and the benchmark 10-year
CA10YT=RR falling 4 Canadian cents to yield 1.495 percent.
The Canada-U.S. two-year bond spread was -27.0 basis points,
while the 10-year spread was -73.2 basis points.