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CANADA FX DEBT-C$ dips as investors 'lighten up' on dollar shorts ahead of Fed decision

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar weakens 0.1% against the greenback
    * Canadian factory shipments rise 7.0% in July
    * Canadian home sales climb to a record high in August 
    * Canadian bond yields were little changed across the curve

    By Fergal Smith
    TORONTO, Sept 15 (Reuters) - The Canadian dollar edged lower
against its U.S. counterpart on Tuesday as investors scaled back
bets against the greenback ahead of a Federal Reserve interest
rate decision, with the loonie unable to get a lift from
encouraging domestic data.
    The loonie        was trading 0.1% lower at 1.3185 to the
greenback, or 75.84 U.S. cents. The currency traded in a range
of 1.3134 to 1.3202.
    The market is "seeing some entrenched USD shorts lighten up
here ahead of a Fed meeting that likely won't deliver anything
new when it comes to 'actual' policy action," said Erik Bregar,
head of FX strategy at the Exchange Bank of Canada.
    The Fed's interest rate decision is due on Wednesday, which
will be the first since it unveiled a landmark shift to a more
tolerant stance on inflation in August. 
    The U.S. dollar        clawed back much of its decline
against a basket of major currencies, while U.S. crude oil
futures        settled 2.7% higher at $38.28 a barrel. Oil is
one of Canada's major exports.
    "I think USD-CAD traders have been right to ignore today's
rise in crude because it's not a demand story, but simply the
market pricing in some Hurricane Sally risk," Bregar said.    
    Canadian factory sales rose for the third straight month in
July, climbing 7.0% from June, Statistics Canada said.
            
    Separate data, from the Canadian Real Estate Association,
showed that home sales increased 6.2% in August to reach a
record high.
    Canada's inflation report for August is due on Wednesday,
while the July retail sales report is set for Friday.
    Canadian government bond yields were little changed across
much of the curve, with the 10-year             up less than
half a basis point at 0.558%.

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Peter
Cooney)
  
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