(Updates with reaction to Federal Reserve holding rates steady)
* Canadian dollar at C$1.3178, or 75.88 U.S. cents
* Bond prices lower across the maturity curve
By Alastair Sharp
TORONTO, Oct 28 (Reuters) - The Canadian dollar gave up most
earlier gains against its U.S. counterpart on Wednesday after
the Federal Reserve put a December U.S. interest rate hike
firmly on the agenda, offsetting the impact of a bounce in crude
oil prices.
The U.S. central bank held rates steady as expected but
surprised investors with an overt reference to its December
meeting.
"In this circumstance, with the Fed seemingly trying to get
back in play, certainly you have to think in terms of the
relative policy stances that the Fed is closer to normalising
interest rates compared to the Bank of Canada," said Mazen Issa,
senior foreign exchange strategist at TD Securities.
The loonie, as the Canadian currency is colloquially known,
weakened to above C$1.32 to the greenback after the news, from
C$1.31 immediately before.
It was at C$1.3178, or 75.88 U.S. cents, by 3:34 p.m. EDT
(1934 GMT), still stronger than Tuesday's official close of
C$1.3266, or 75.38 U.S. cents.
It had earlier touched C$1.3281, or 75.30 U.S. cents, its
weakest since Oct. 1.
The commodity-linked currency had gained ahead of the Fed as
a bump in chronically weak oil prices provided support.
U.S. crude CLc1 prices settled up 6.3 percent to $45.94 a
barrel, while Brent LCOc1 added 4.7 percent to $49.05. O/R
The Canadian dollar was outperforming all of its key
currency counterparts.
Canadian government bond prices fell across the maturity
curve, with the two-year CA2YT=RR price down 9.5 Canadian
cents to yield 0.541 percent and the benchmark 10-year
CA10YT=RR falling 46 Canadian cents to yield 1.469 percent.
Canada-U.S. bond spreads widened after the Fed news, with
the two-year bond spread at -16.6 basis points, and the 10-year
spread at -62.1 basis points.
(Editing by W Simon and James Dalgleish)