* C$ rises on expectations of action by Federal Reserve * Bond prices drift lower across the curve By Claire Sibonney TORONTO, Sept 11 (Reuters) - The Canadian dollar surged to its strongest level in more than 13 months against its U.S. counterpart on Tuesday, lifted by expectations the U.S. Federal Reserve would unveil further steps to stimulate its economy this week. Poor U.S jobs data last week raised expectations the Fed will launch another asset purchase program, a move that would weigh on the U.S. dollar against higher-yielding currencies such as Canada's. The Fed will begin a two-day policy meeting on Wednesday. By contrast, Canada's stronger-than-expected domestic employment numbers were seen bolstering the Bank of Canada's already hawkish stance. "The market is comfortable from both a technical and fundamental perspective to push the Canadian dollar higher, and in the absence of any cautionary talk from the Bank of Canada or the finance minister it looks like it's going to continue to trend that way," said Jack Spitz, managing director of foreign exchange at National Bank Financial. "The inference is that the Bank of Canada will be the first of the G7 countries to raise interest rates as soon as markets 'normalize'." In addition to the Fed's policy announcement at the close of its meeting on Thursday, markets are awaiting a German ruling on the euro zone's new bailout fund and an election in the Netherlands. At 8:13 a.m. (1213 GMT), the Canadian dollar was at C$0.9719 versus the greenback, or $1.0289, after hitting its highest level since Aug. 4, 2011. The currency ended Monday's North American session at C$0.9775, or $1.0230. Spitz noted that the next significant resistance level for the Canadian dollar was around a July 2011 high at C$0.9407. Canadian government bond prices retreated across the curve, with the two-year bond off 3 Canadian cents to yield 1.174 percent and the benchmark 10-year bond down 18 Canadian cents, yielding 1.845 percent.