CANADA FX DEBT-C$ holds above C$1.20 ahead of Bank of Canada report

* Canadian dollar at C$C$1.2070 or 82.85 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Jan 21 (Reuters) - The Canadian dollar was stronger
against its U.S. counterpart on Wednesday, helped by firmer
crude oil prices, but the currency remained above the key
psychological C$1.20 level as investors awaited the Bank of
Canada's Monetary Policy Report.
    The central bank is widely expected to keep interest rates
unchanged at 1 percent, but market participants are keen to see
what it will say about the impact of cheap crude, and how much
lower it will revise its forecasts on growth and inflation.
    The market has also begun pricing in a higher risk of an
rate cut, though most strategists still believe a hike is
eventually in order, even as some predictions have begun pushing
the next move further back.
    "Markets are just nervously consolidating ahead of the Bank
of Canada. Most people are expecting a dovish turn, but nothing
as extreme as an outright easing bias," said Greg Anderson,
global head of foreign exchange strategy with BMO Capital
Markets in New York.
    At 8:58 a.m. (1358 GMT), the Canadian dollar was at
C$1.2070 to the greenback, or 82.85 U.S. cents, stronger than
Tuesday's close of C$1.2107, or 82.60 U.S. cents, but still
trading near levels not seen in more than 5-1/2 years.
    A bond-buying stimulus program by the European Central Bank
expected on Thursday helped push crude prices higher, which
provided some support for the commodity-sensitive Canadian
    Canada is a major exporter of crude. The currency's moves
have been closely tied to the price of oil, which has plunged
more than 50 percent since June.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1.5 Canadian
cents to yield 0.841 percent and the benchmark 10-year
 up 2 Canadian cents to yield 1.486 percent.

 (Editing by Jeffrey Benkoe)