* C$ softens to C$0.9895 vs. US$, or $1.0106
* Little movement ahead of Friday's key Fed speech
* Bond prices mixed
By Solarina Ho
TORONTO, Aug 29 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday, easing with the price
of oil and other commodities, but anticipation of a key speech
by Federal Reserve Chairman Ben Bernanke on Friday kept the
currency trading in a tight range.
Oil prices slipped as damage from Hurricane Isaac to oil
production is expected to be limited and in reaction to data
showing a rise in U.S. crude oil stocks.
"We're seeing the Canadian dollar holding up relatively well
considering that we've seen a decline in oil prices," said
Charles St-Arnaud, Canadian economist and currency strategist
with Nomura Securities International.
The Canadian dollar ended the session at C$0.9895 versus the
greenback, or $1.0106, softer than Tuesday's North American
session close at C$0.9878 against the U.S. dollar, or $1.0124.
The currency retreated from a high of C$0.9843, or $1.0160
reached on Tuesday, which matched the 3-1/2 month high seen last
week.
St-Arnaud said barring a definitive announcement on
quantitative easing by the Fed or strong economic data, the
Canadian dollar was not expected to break the C$0.9800 level.
Bernanke will speak at a conference of central bankers in
Jackson Hole, Wyoming, on Friday and market watchers will be
looking for clues on the timing of a possible stimulus move.
Bernanke's speech kicks off an eventful few weeks which
include an election in the French-speaking province of Quebec,
where the separatist party is projected to win a minority
government.
"Investors who don't understand completely all the subtlety
of Quebec politics will probably get scared by the likelihood of
a new (separatist) referendum ... I expect actually that we'll
see an impact (on the currency)," said St-Arnaud.
"The Parti Quebecois won't be elected because suddenly the
population in Quebec is in favor of independence. It's more a
matter of, after nine years of the Liberals, everybody wants a
change."
On the crosses, investors continued to favor holding the
Canadian dollar over the euro, St-Arnaud said, amid ongoing
uncertainties in the euro zone.
Traders speculated that news European Central Bank President
Mario Draghi was too busy to attend Friday's Jackson Hole
meeting meant he could announce a long-awaited plan to bring
down Spanish and Italian borrowing costs at the ECB's Sept. 6
policy meeting.
"The market may be disappointed by (Draghi) as well but I
think we're talking about event risks as they happen and they're
going to be fast and furious starting this Friday," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial.
Canadian bond prices were mixed, with the two-year bond
up 3 Canadian cents to yield 1.150 percent and the
benchmark 10-year bond down 8 Canadian cents to
yield 1.806 percent.