* C$ at C$1.0295 vs US$ or 97.13 U.S. cents * Factory sales rose by 1.7 percent in July * Focus on U.S. Fed ahead of Wednesday announcement * Canadian bond prices mixed By Leah Schnurr TORONTO, Sept 17 The Canadian dollar strengthened on Tuesday, boosted by surprisingly strong factory sales, but the currency was kept in a range the day before the U.S. central bank is expected to announce it will start to unwind its economic stimulus. Canadian manufacturing sales rose more than expected in July as most sectors gained, suggesting economic growth could be picking up. Still, analysts said more data was needed to complete the picture. The data helped support the dollar, but much of investors' attention was focused south of the border, with the Federal Reserve kicking off its two-day policy-setting meeting with a statement to come on Wednesday. Markets largely expect the Fed will begin slowly withdrawing its massive economic stimulus program. It is currently buying $85 billion in assets a month and investors anticipate the Fed will reduce that by a moderate amount. "With both the current and potentially future Fed governors being a little bit more on the dovish side, I think any pullback in bond buying would be modest, as they've signaled so far," said Don Mikolich, executive director of foreign exchange sales at CIBC World Market. While the Fed's purchase program - known as quantitative easing - has boosted equities and other assets this year, Mikolich said the announcement of a small reduction could be positive for the Canadian dollar, as it suggests an improving economy in the United States, Canada's biggest trading partner, The Canadian dollar ended at C$1.0295 to the U.S. dollar, or 97.13 U.S. cents, stronger than Monday's session close of C$1.0325, or 96.85 U.S. cents. The loonie climbed as high as $1.0275, making a more than one-month peak. The Fed announcement is expected at 2:00 pm EDT (1800 GMT) on Wednesday. "You've coalesced around a really strong consensus of a modest taper of 10 to 15 billion dollars, so I think it would come as quite a surprise to markets if they chose something different tomorrow," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada in Toronto. At home, investors will also be watching a speech from Bank of Canada Governor Stephen Poloz scheduled for Wednesday. Prices for Canadian government bonds were mixed across the maturity curve, with the two-year bond up 1 Canadian cent to yield 1.261 percent, and the benchmark 10-year bond rose 7 Canadian cents to yield 2.769 percent.