CANADA FX DEBT-C$ holds near 12-month highs as Fed eyed

* C$ hits 12-month high at C$0.9755 vs US$, or $1.0251
    * Bond prices higher across the curve

    By Solarina Ho
    TORONTO, Sept 10 (Reuters) - The Canadian dollar hit its
loftiest level in more than one year against its U.S.
counterpart on Monday, outperforming other major currencies amid
hopes of further stimulus in the United States.
    The market is pricing in some expectation that the Federal
Reserve will decide on a third round of monetary easing when it
meets later this week, following data last Friday that showed
U.S. jobs growth in August was well below what would normally be
needed to put a dent in the jobless rate.
    "The risk backdrop remains positive here. The weaker-than-
expected U.S. employment number has fueled the fire for the
market looking for a potential nod to QE3 out of the Fed," said
Matt Perrier, a director of foreign exchange sales at BMO
Capital Markets.
    The Canadian dollar finished at C$0.9775 against
the greenback, or $1.0230, firmer than Friday's North American
session close at C$0.9782, or $1.0223.
    Earlier in the session, the currency hit a session
high of C$0.9755 to the U.S. dollar, or $1.0251, its strongest
level since Sept. 1, 2011.
    Further stimulus will bolster non-U.S. currencies and
analysts say the market will be looking to see exactly how much
money the Fed will pump into the economy.
    Traders also cited improved risk appetite in general after
the European Central Bank last week unveiled a plan to cut
borrowing costs for its most indebted countries.
    Weak trade data out of China on Monday underlined the
likelihood of more Beijing-backed spending, which could also
bolster the commodities-linked Canadian dollar.
    "The other outlier that people aren't talking about quite as
much is the pace of things in China and commodity prices," said
Dov Zigler, financial markets economist at Scotiabank.
    "If there were to be meaningful stimulus measures out of
China, you'd definitely see a rally in the Australian dollar and
with it, a lot of the currencies that move in lockstep - CAD
being another one. It's one of those weird situations where bad
news becomes good news."
    Chinese firms have been cutting production, inventories and
imports in the face of anemic global demand. It's grim news for
the country where exports generate 25 percent of gross domestic
product and support an estimated 200 million jobs.
    Perrier pointed to the next resistance level around         
C$0.9725, near the August 2011 high. Breaking through that could
open up the way toward C$0.95 and then C$0.94.
    Canadian government bond prices were higher across the
curve, with the two-year bond off 1.5 Canadian cents
to yield 1.168 percent and the benchmark 10-year bond
 up 28 Canadian cents, yielding 1.825 percent.