* Canadian dollar at C$1.0610 or 94.25 U.S. cents * Bond prices up across the maturity curve By Leah Schnurr TORONTO, Dec 17 The Canadian dollar weakened modestly against the greenback on Tuesday as investors placed their bets on whether the U.S. Federal Reserve would begin winding down its stimulus program at the conclusion of its two-day policy meeting this week. Flat U.S. consumer prices for November released on Tuesday did little to sway markets one way or the other after a spate of recent data that has suggested the U.S. economy is on an upswing. In Canada, a report showed manufacturing sales jumped in October on strong sales in the food sector. The loonie's reaction was muted. The Fed will release a statement at the end of its meeting on Wednesday and investors will be looking for clear language on what plans it has for its asset purchase program, with some seeing the possibility the Fed could begin reducing its $85 billion a month in bond purchases. The possibility that the withdrawal of quantitative easing, or "QE", could start imminently already may have been priced into the market in recent weeks, said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada in Toronto. "Today's action may be people just taking some of their chips off the table," Chandler said. The Canadian dollar ended the North American session at C$1.0610 to the greenback, or 94.25 U.S. cents, weaker than Monday's close of C$1.0587, or 94.46 U.S. cents. If the Fed opts for a faster timetable for withdrawing stimulus, that is seen as a negative for the Canadian dollar because it is expected to reduce appetite for risk, thereby benefiting the U.S. currency. Markets were caught off guard in September when the Fed decided to hold steady, rather than trim the program as many had expected. "I think there's still somewhere around a 30 percent chance that they might begin some sort of modest amount of tapering, in which case we would see the U.S. dollar react positively at the time," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. The loonie is likely to trade in the C$1.055 to C$1.0640 range, said Mikolich, though if the Fed does move toward tapering, the C$1.0735 levels could come back into play. The Canadian currency traded as low as C$1.0708 earlier in the month, its lowest level in 3-1/2 years. Canadian government bond prices were higher across the maturity curve, with the two-year up 1.8 Canadian cents to yield 1.107 percent and the benchmark 10-year up 26 Canadian cents to yield 2.643 percent.