CANADA FX DEBT-C$ boosted by stronger factory sales, eyes on Fed

* C$ at C$1.0315 vs US$ or 96.95 U.S. cents
    * Factory sales rose by 1.7 percent in July
    * Canadian bond prices gain

    By Leah Schnurr
    TORONTO, Sept 17 (Reuters) - The Canadian dollar was
slightly stronger on Tuesday after receiving an early boost from
surprisingly strong factory sales, but anticipation over the
U.S. Federal Reserve's two-day meeting kept the currency within
a range.
    Canadian manufacturing sales rose more strongly than
expected in July as most sectors gained, while June's sales were
also revised up. 
    "We needed this to cling to the hope of a third-quarter
rebound," said Mark Chandler, head of Canadian fixed income and
currency strategy. But it's still early days, Chandler noted,
and more data is needed to fill in the picture.
    "The bar has been set really high for a rebound in some of
this activity data and at least on this one we dodged a bullet,"
he said.
    The Canadian dollar was at C$1.0315 to the U.S.
dollar, or 96.95 U.S. cents, stronger than Monday's session
close of C$1.0325, or 96.85 U.S. cents. The loonie touched a
session high of $1.0304 shortly after the data was released.
    Much of investors' attention was focused south of the
border, with the U.S. central bank set to start its two-day
policy-setting meeting with a statement to come on Wednesday.
    Markets largely expect the Fed will begin winding down its
massive economic stimulus program. The central bank is currently
buying $85 billion in assets a month and investors anticipate
the Fed will reduce that by a modest amount.
    "You've coalesced around a really strong consensus of a
modest taper of $10 to $15 billion dollars, so I think it would
come as quite a surprise to markets if they chose something
different tomorrow," said Chandler. 
    At home, investors will also be watching a speech from Bank
of Canada Governor Stephen Poloz scheduled for Wednesday.
    Prices for Canadian government bonds were higher across the
maturity curve, with the two-year bond up 1 and a
half Canadian cents to yield 1.258 percent, and the benchmark
10-year bond rose 8 Canadian cents to yield 2.768