CANADA FX DEBT-Canadian dollar weaker as Poloz speaks on untapped growth

 (Recasts with Poloz comments, adds quotes, updates prices)
    * Poloz speaks on untapped labor potential
    * Trading volatile on U.S. data, political headlines 

    By Karen Brettell
    NEW YORK, March 13 (Reuters) - The Canadian dollar weakened
against the greenback on Tuesday after Bank of Canada Governor
Stephen Poloz said that the country’s economy could grow without
spurring inflation, though investor positioning was seen as
exaggerating the move.
    Poloz said that there remains a degree of untapped potential
in the Canadian economy, particularly in the labor market, with
youth, women and indigenous people representing untapped sources
of potential economic growth.             
    “Those are all statements he’s made in the past; today what
he did do is he attached a number to that growth and potential
output,” said Bipan Rai, director of foreign exchange strategy
at CIBC Capital Markets in Toronto.
    Poloz said that expanding Canada’s labor force could
increase the country’s potential output by as much as 1.5
    “That doesn’t really explain the outsized market reaction in
CAD on its own. We’re thinking that most of it could have been
driven by positioning and also the fact that the market is
sensitive on one side of the Bank of Canada’s bias,” Rai added.
    Poloz’s speech comes after the central bank held interest
rates steady last week as expected, while a speech from Deputy
Governor Tim Lane on Thursday stuck to the bank's dovish message
that it will be cautious in considering further increases.
    At 2:06 p.m. EST (1806 GMT) the greenback was up 0.79
percent against the Canadian dollar          at C$1.2937.
    The U.S. dollar had weakened against the loonie earlier on
Tuesday after data showed that U.S. consumer prices cooled in
February and after President Donald Trump said he was replacing
U.S. Secretary of State Rex Tillerson with Central Intelligence
Agency Director Mike Pompeo.                          
    Benchmark 10-year Canadian government bond yields
            fell to 2.21 percent, from 2.24 percent late Monday.

 (Editing by Jonathan Oatis and James Dalgleish)