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* Touches high of C$1.0116 to the US$, or 98.85 U.S. cents
* Bond prices flat to higher
By Jennifer Kwan
TORONTO, Oct 6 (Reuters) - Canada's dollar rallied to a two-month high on Wednesday as the greenback tumbled against a range of currencies on growing expectations the U.S. Federal Reserve will further ease monetary policy.
Recent comments by Chicago Fed President Charles Evans, who was quoted as saying the central bank should do much more to spur the economy, kept negative dollar sentiment firmly intact. [FRX/] [ID:nN05203033]
Speculation about further Fed action grew in the aftermath of easing steps by the Bank of Japan, which on Tuesday pledged to pump more funds into the struggling economy and keep rates almost at zero in a surprise move that helped to send commodity and equity markets sharply higher. [MKTS/GLOB] [ID:nTOE69305D]
"It does seem like central banks are preparing to do more to support the global economy," said Doug Porter, deputy chief economist at BMO Capital Markets.
The Canadian currency CAD=D4 rose as high as C$1.0116 to the U.S. dollar, or 98.85 U.S. cents, its strongest since Aug. 5. By 8:33 a.m. (1233 GMT) it trimmed gains and was at C$1.0152 to the U.S. dollar, or 98.50 U.S. cents, still comfortably higher than Tuesday's finish at C$1.0173 to the U.S. dollar, or 98.30 U.S. cents.
A "disappointing" U.S. private sector employment reading helped drag the Canadian dollar back from the session high, said Porter. [ID:nEAP103400]
"It does suggest there is some downside risk to Friday's U.S. employment report. The general view was that we'd see some modest underlying improvement in private sector employment for September. But the ADP figure suggests just the opposite," said Porter.
Friday's U.S. report is expected to show overall nonfarm payrolls were unchanged in September, based on a Reuters poll of analysts, but a rise in private payrolls of 75,000. [ECI/US]
Canadian government bond prices followed U.S. Treasuries higher. The two-year bond CA2YT=RR climbed 5 Canadian cents to yield 1.337 percent, while the 10-year bond CA10YT=RR rose 40 Canadian cents to yield 2.722 percent. (Editing by Jeffrey Hodgson)