CANADA FX DEBT-C$ higher vs US$ as Fed stays course; Cyprus eyed

* C$ at C$1.0254 vs US$, or 97.52 U.S. cents
    * C$ firms vs yen, NZD, AUD; weaker vs euro
    * Federal Reserve maintains bond-buying policy
    * Bond prices fall across curve

    By Solarina Ho
    TORONTO, March 20 (Reuters) - The Canadian dollar held onto
session gains against its U.S. counterpart on Wednesday after
the Federal Reserve said it would continue its aggressive
monetary easing policy.
    The Fed said it will continue to buy $85 billion in mortgage
and Treasury bonds per month and acknowledged signs the
country's economy was improving. The decision came despite
growing concerns from some officials about the risks the
purchases could pose. 
    The Canadian dollar's "stronger, having strengthened from
noon onwards, but not materially so - still within the range for
the day," said Camilla Sutton, chief currency strategist at
Scotiabank, adding the Canadian dollar was not particularly
active, with much of the focus remaining on Cyprus.
    The U.S. central bank was a touch more dovish in a nod to
the uncertainty in Europe. It removed a reference from its last
policy statement that said global financial strains were easing.
    The Canadian dollar strengthened earlier in the session on
hopes 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.
    The Canadian dollar, which traded within a narrow 37-point
range on Wednesday, finished the North American session at
C$1.0254 versus the U.S. dollar, or 97.52 U.S. cents, stronger
than Tuesday's close at C$1.0270, or 97.37 U.S. cents.
    It was stronger against most other major foreign currencies,
including the Japanese yen and its commodities-linked
cousins, the New Zealand and Australian dollars
. It was weaker against the euro.
    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.
    Looking ahead, Cyprus will remain the center of attention,
along with overnight PMI data from overseas. On the Canadian
data front, retail sales and the federal budget are both
expected Thursday.
    Canadian government bonds eased across the curve, with the
two-year bond down 4 Canadian cents to yield 0.990
percent, while the benchmark 10-year bond fell 33
Canadian cents to yield 1.858 percent.