CANADA FX DEBT-C$ weakens as investors mull central bank policies

* Canadian dollar at C$1.0971 or 91.15 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Aug 25 (Reuters) - The Canadian dollar weakened
against the greenback on Monday, hurt by concerns that diverging
paths for central bank policy could leave the Bank of Canada on
the sidelines even when the Federal Reserve ultimately starts
raising rates.
    On the economic front, the loonie had few catalysts, with no
domestic data on the docket until Friday's gross domestic
product report. Analysts are forecasting the economy likely
bounced back in the second quarter after being hit by unusually
severe winter weather in the first three months of the year.
    But the market homed in on comments made by Bank of Canada
Governor Stephen Poloz in Jackson Hole, Wyoming over the
weekend. Poloz said the Bank of Canada won't necessarily
immediately follow the United States when the Fed starts hiking
rates, the Globe and Mail reported.
    "The focus has been on the Poloz comments made over the
weekend, where he's very definitely trying to talk down the idea
of interest rates moving up in line with the U.S. when the Fed
eventually starts to tighten," said Shaun Osborne, chief
currency strategist at TD Securities in Toronto.
    "He's trying to draw perhaps a little more blue sky between
the policy outlook in the U.S. and that of Canada."
    Analysts expect the Bank of Canada won't raise rates until
the third quarter of next year, a Reuters poll conducted last
month found. At the same time, there has generally been the view
that Canadian monetary policy will follow that of the United
    The comments "suggest they're not going to be as tightly
linked to the policy outlook in the U.S. as some people
currently think they will be," said Osborne.
    The Canadian dollar was at C$1.0971 to the
greenback, or 91.15 U.S. cents, weaker than Friday's close of
C$1.0945, or 91.37 U.S. cents.
    Speaking at the annual meeting of policymakers and
economists in Jackson Hole, Fed Chair Yellen said last week the
central bank should move cautiously in deciding when to raise
rates, even as a number of top Fed officials pressed their case
for an early hike. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1 Canadian cent
to yield 1.089 percent and the benchmark 10-year up
19 Canadian cents to yield 2.054 percent.

 (Editing by Jonathan Oatis)