CANADA FX DEBT-C$ hits one-week low as oil falls, Fed talk boosts greenback

(New throughout, updates prices and market activity, adds
strategist comment)
    * Canadian dollar settles at C$1.3214, or 75.68 U.S. cents
    * Bond prices higher across flatter maturity curve

    By Alastair Sharp
    TORONTO, March 23 (Reuters) - The Canadian dollar weakened
to a one-week low against its U.S. counterpart on Wednesday as
crude oil prices fell and the greenback was boosted by comments
from Federal Reserve officials in support of rate hikes.
    Oil prices lost 4 percent as U.S. crude stockpiles rose more
than expected, reinforcing concerns about a stubborn global
    "Crude still matters," said Darcy Browne, managing director
of foreign exchange sales at CIBC Capital Markets. "It's still
one of the driving factors on a short-term basis. That and the
    One Fed official said the U.S. central bank should consider
hiking interest rates as early as next month and three times
this year, while another said he expects two hikes this year.
Another Fed official called inflation expectations that were
stabilizing "a hopeful sign". 
    The Canadian dollar settled at C$1.3214 to the
greenback, or 75.68 U.S. cents, much weaker than Tuesday's
official close of C$1.3035, or 76.72 U.S. cents.
    The currency's strongest level of the session was C$1.3038,
while it touched its weakest since March 16 at C$1.3220.
    Tuesday's federal budget had little impact on the Canadian
dollar, although the fiscal stimulus announced is expected to
keep the Bank of Canada from moving on rates this year.
    The implied probability of a rate cut by year end has
dropped to less than 20 percent from 87 percent a little more
than one month ago. 
    "There was nothing in the details (of the federal budget) to
suggest it should help the Canadian dollar, especially at the
levels that the U.S. dollars has been oversold to," CIBC's
Browne said. 
    The new Liberal government said in a bid to revive growth it
would run a C$29.4 billion deficit for fiscal 2016-17, close to
market expectations.
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 4.5
Canadian cents to yield 0.560 percent and the benchmark 10-year
 rising 79 Canadian cents to yield 1.244 percent.
    The curve flattened, as the spread between the 2-year and
10-year yields narrowed by 5.9 basis points to 68.4 basis
points, indicating outperformance for longer-dated maturities.

 (Additional reporting by Fergal Smith; Editing by Meredith