C$ ends little changed after Fed decision, oil weighs

By Alastair Sharp TORONTO (Reuters) - The Canadian dollar ended barely weaker against the U.S. currency on Wednesday, stabilizing after a recent string of declines, as the U.S. Federal Reserve held rates steady and oil prices fell. The Canadian currency settled at C$1.3191 to the greenback, or 75.81 U.S. cents, just weaker than the Bank of Canada's official close of C$1.3189, or 75.82 U.S. cents on Tuesday. The Fed said near-term risks to its outlook had diminished, as investors sought to judge whether a rate hike might come in September or December. "It's a bit of a nod that things have improved," said Mazen Issa, senior foreign exchange strategist at TD Securities. "But I think the market needs to get through the (Bank of Japan) meeting later this week to really get a sense of where the balance of risks lie." The Japanese central bank is under pressure to add monetary stimulus to the $265 billion fiscal stimulus the country's government unveiled on Wednesday. A sharp fall in the price of oil, a major Canadian export, also weighed on the loonie, as Canada's currency is colloquially known. Oil tumbled 3 percent, hitting three-month lows as U.S. crude and gasoline stocks surged on weak demand during the peak summer driving season. [O/R] "Certainly commodity prices are not helping the domestic economy," Issa said. The currency touched its weakest level in nearly four months earlier in the week and has lost about 2 percent in July as oil prices drifted lower. The Canadian economic calendar is light until Friday, when gross domestic product data will be released for May. The economy is forecast to have shrunk 0.4 percent in the month, hurt by wildfires in Alberta. Canadian government bond prices were higher across the maturity curve, with the two-year price up 3.5 Canadian cents to yield 0.578 percent and the benchmark 10-year rising 44 Canadian cents to yield 1.077 percent. The Canada-U.S. two-year bond spread narrowed to -14 basis points, while the 10-year spread came in to -42.2 basis points. (Additional reporting by Leah Schnurr; Editing by Nick Zieminski and Jeffrey Hodgson)