CANADA FX DEBT-C$ firms on Cyprus hopes; Fed in focus

* C$ at C$1.0254 vs US$, or 97.52 U.S. cents
    * C$ firms vs yen, NZD, AUD; weaker vs European currencies
    * Fed expected to maintain bond buying policy
    * Bond prices fall across curve

    By Solarina Ho
    TORONTO, March 20 (Reuters) - The Canadian dollar firmed
against its U.S. counterpart on Wednesday as investors were
hopeful a Cyprus deal could be reached to rescue the indebted
euro zone country.
   The Cypriot parliament rejected on Tuesday a proposed levy on
bank deposits, which was a condition for the bailout. The
general assumption in markets is that policymakers will cobble
together a deal to keep Cyprus in the currency bloc. 
    "I think the market's taking a wait and see ... the hopes
are that they come to some solution that won't be quite as
radical," said Don Mikolich, executive director, foreign
exchange sales at CIBC World Markets.
    At 9:23 a.m. (1323 GMT), the Canadian dollar was trading at
C$1.0254 versus the greenback, or 97.52 U.S. cents, stronger
than Tuesday's North American session finish at C$1.0270, or
97.37 U.S. cents.
    Its performance was mixed against other key foreign
currencies. It was stronger against the Japanese yen 
and its commodities-linked cousins, the New Zealand 
and Australian dollars. It was underperforming
against its European counterparts including the euro 
and sterling.
    Mikolich said the currency was likely to trade between
C$1.0210 and C$1.03 on Wednesday.
    The loonie, as the currency is colloquially known, remains
under pressure as domestic data remains mixed and more evidence
is needed to support last month's robust employment figures.
    The Canadian dollar traded within a narrow 37 point range on
Wednesday, between C$1.0239 and C$1.0276. Mikolich said comments
from the Federal Reserve this afternoon will be the next likely
currency driver.
    The U.S. central bank is wrapping up a two-day meeting on
Wednesday and will release its policy statement along with a new
set of economic projections at 2 p.m.
    It is expected to maintain its policy of buying $85 billion
a month in mortgage and Treasury bonds although there is
expected to be a debate about the potential risks of stimulus.
    Prices for Canadian government debt slipped across the
curve, with the two-year bond down 3.8 Canadian cents
to yield 0.989 percent, while the benchmark 10-year bond
 eased 29 Canadian cents to yield 1.854 percent.