CANADA FX DEBT-C$ edges higher on euro zone hopes

* C$ at C$0.9912 vs $US, or $1.0088
    * Bond prices softer across curve
    * Fed meeting, Canadian GDP eyed next week

    By Solarina Ho
    TORONTO, Aug 24 (Reuters) - The Canadian dollar strengthened
against the U.S. dollar on Friday, modestly reversing a recent
selloff, after encouraging news out of Europe lifted global
economic sentiment.
    The European Central Bank is considering setting yield band
targets under a new bond-buying program to allow it to keep its
strategy shielded and avoid speculators trying to cash in,
central bank sources told Reuters on Friday. It's a decision
that will not be made before the ECB's Sept. 6 policy meeting,
however, they said. 
    "That definitely helped risk appetite. You saw stocks rally
on that and the Canadian dollar rallying a little bit on that as
well," said Benjamin Reitzes, senior economist and foreign
exchange strategist BMO Capital Markets.
    At 3:46 p.m. (1946 GMT), the Canadian dollar stood
at C$0.9912 versus the U.S. dollar, or $1.0088, firmer than
Thursday's North American session close at C$0.9936, or $1.0064.
The currency has come off three-and-a-half-month highs against
the greenback reached this week, with currency strategists
viewing the currency as oversold.
    All eyes will be on U.S. Federal Reserve Chairman Ben
Bernanke and other central bank leaders when they meet in
Jackson Hole, Wyoming, next week for an annual get-together that
often hints at what monetary policy is to come.
    In a letter obtained by Reuters on Friday, Bernanke told a
congressional oversight panel the Fed has room to deliver
additional monetary stimulus to boost the U.S. economy.
    Also in focus will be Canadian GDP figures, which are
expected to be soft, though Reitzes said the numbers will not be
bad considering the state of the global economy.
    "That being said, it's nowhere near strong enough for the
Bank of Canada to start raising rates," he cautioned, noting
that yields have been a meaningful driver of the currency in
recent weeks.
    "If Bernanke signals they're going to ease further, it's not
as if the Bank of Canada can go on a hiking parade. There's a
limited amount that their policies can diverge," said Reitzes,
adding the limitations will cap strength in the Canadian dollar
and limit upward pressure on yields.
    Canadian bond prices slipped across the curve, with the
two-year bond down 4 Canadian cents to yield 1.149
percent and the benchmark 10-year bond losing 1
Canadian cent to yield 1.825 percent.