CANADA FX DEBT-C$ treads water, remains near 7-month highs vs. U.S. dollar

    * Canadian dollar at C$1.3138 to the greenback
    * Bond prices lower across the maturity curve

    By Saqib Iqbal Ahmed
    Aug 27 (Reuters) - The Canadian dollar was little changed
against its U.S. counterpart on Thursday as the U.S. currency
recovered from early weakness following the U.S. Federal
Reserve's approval of  a new strategy revising its established
practice of preemptively lifting interest rates to head off
inflation.
    The Canadian dollar        was at C$1.3126 to the greenback,
or 76.18 U.S. cents, close to Wednesday's close of C$1.3139, or
76.11 U.S. cents. Earlier in the session, the loonie hit a
7-month high of C$1.3105 before erasing the day's gains.
    Stability in the price of oil, one of Canada's main exports,
along with robust investor appetite for riskier assets, has
helped support the Canadian dollar in recent sessions.
    The Federal Reserve on Thursday rolled out an aggressive new
strategy to restore the United States to full employment and
lift inflation back to healthier levels in a world where it now
believes that "downward risks to employment and inflation have
increased."             
    Earlier this week, Bank of Canada Deputy Governor Lawrence
Schembri said the economic shock of the pandemic will test
public confidence in the bank's inflation target.             
    "It remains to be seen how far the policy review takes the
BoC from its current mandate but there is clearly a strong
current of thought running among central bankers in North
America at least that allowing inflation to run a little 'hot'
may be an approach worth looking at more closely," Shaun
Osborne, chief FX strategist at Scotia Bank, said in a note.
    Canadian government bond prices were lower across the
maturity curve. The two-year            yield was at 0.294% up
from 0.294% late on Wednesday, while the benchmark Canadian
10-year             yield rose to 0.624% from 0.61%.

 (Reporting by Saqib Iqbal Ahmed; Editing by Dan Grebler)
  

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