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* Canadian dollar at C$1.0972 or 91.14 U.S. cents * Bond prices mostly lower across the maturity curve By Leah Schnurr TORONTO, Jan 21 (Reuters) - The Canadian dollar fell to a four-year low against the greenback on Tuesday, breaking through the psychologically important C$1.10 level as investors speculated over the path of monetary policy on both sides of the border. Still, the loonie backed off the lows for the session after data showed Canadian manufacturing sales rose more than expected in November to their highest in almost two years. The U.S. dollar rose as there was some expectation the Federal Reserve could further reduce the pace of its economic stimulus program. The Wall Street Journal said that the Fed may trim its bond purchases to $65 billion a month from the current $75 billion when the central bank meets at the end of January. A swifter pace for unwinding the Fed's quantitative easing program is seen as a negative for the Canadian dollar as it will likely boost investor appetite for the U.S. currency. At the same time, concerns that the Bank of Canada could sound more dovish at its policy-setting meeting on Wednesday drove the loonie lower. The Bank of Canada shifted gears in October last year, dropping any talk of rate hikes after 18 months of signaling that tightening was on the horizon. The change has weighed heavily on the Canadian dollar and the U.S. dollar has appreciated more than 3 percent against the loonie just three weeks into 2014. "The sentiment does continue to be quite firmly against Canada," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. After some disappointing economic data earlier this month, including a surprise increase in the unemployment rate, markets are positioning for the Bank of Canada to take a more dovish tone following Wednesday's meeting. "They've been dovish on a good day," said Mikolich. "They've been comfortable to see the currency weaken off to a certain level. It's hard to say what levels they have in mind, ultimately, but I don't think we're there yet." The Canadian dollar was at C$1.0972 to the greenback, or 91.14 U.S. cents, weaker than Monday's close of C$1.0951, or 91.32 U.S. cents. The Canadian currency fell as far as C$1.1019, its lowest level since September 2009. That session low will likely be a floor for the loonie heading into the Bank of Canada announcement, said Mikolich. The Canadian dollar trimmed declines after factory sales jumped 1 percent in November, though a separate report showed wholesale trade was disappointingly flat in November. Canadian government bond prices were mostly lower across the maturity curve, with the two-year off 1 Canadian cent to yield 1.022 percent and the benchmark 10-year down 3 Canadian cents to yield 2.496 percent.