CANADA FX DEBT-C$ at 8-mth low after U.S. data; Bernanke in focus

* C$ hits C$1.0304 vs US$, or 97.05 U.S. cents
    * US$ rallies on strong home sales, consumer confidence
    * Bernanke testimony in focus
    * Investors worried over Italy election uncertainty

    By Solarina Ho
    TORONTO, Feb 26 (Reuters) - The Canadian dollar hit its
weakest level against the U.S. dollar in eight months on
Tuesday, following stronger-than-expected U.S. data and
congressional testimony by Federal Reserve Chairman Ben
    The U.S. dollar rallied following data that showed new U.S.
single-family home sales surged to their highest in 4-1/2 years
in January, indicating further recovery in the U.S. housing
    Consumer confidence also picked up more than expected in
February as Americans shrugged off worries over fiscal policy
and tax increases.  
    "The preset statements by Bernanke - they seemed to be
overshadowed by suspiciously strong U.S. data that came out.
They're pretty phenomenal figures," said Greg Moore, FX
Strategist at TD Securities.
    The greenback erased some of those gains as Bernanke spoke
to the U.S. senate. He strongly defended the U.S. central bank's
bond-buying stimulus before Congress and urged lawmakers to
avoid sharp spending cuts set to go into effect on Friday.
    The Canadian dollar traded as low as C$1.0304 to the U.S.
currency, or 97.05 U.S. cents, its weakest level since June 29,
2012. This compared with Monday's North American session close
at C$1.0276, or 97.31 U.S. cents.
    The Canadian dollar's performance was mixed against a basket
of major currencies, outperforming its commodities-linked
counterparts, the Australian and New Zealand dollars, but
underperforming the euro and sterling.
    "The trend is still for further softness in our view. So
whatever impact today, if it does see a little bit of a lift
from Bernanke's Q&A session ... we could return to the negative
CAD trend later on this week particularly with the GDP ...
coming up," said Moore.
    The Canadian dollar has been under pressure in recent weeks
following dismal domestic data. Traders are now looking ahead to
fourth-quarter GDP data on Friday. 
    "The expectation is for the market to see sub-trend GDP
growth, so I wouldn't look for too much of a bid tone between
now and Friday," said Matt Perrier, managing director of foreign
exchange sales at BMO Capital Markets.
    Adding to the negative tone were worries that an uncertain
outcome from last weekend's election in Italy, the euro zone's
third-largest economy, will fragment the government and endanger
the country's current economic reform program, reigniting the
region's debt crisis.
    Government bond prices rose across the curve, with the price
of a two-year Canadian government bond climbing 1.5
Canadian cents, to yield 1.008 percent. The benchmark 10-year
bond was up 13 Canadian cents, yielding 1.852