CANADA FX DEBT-C$ firms as Poloz remarks seen reducing chance of rate cut

* Canadian dollar at C$1.2423 or 80.50 U.S. cents
    * Bond prices mostly lower across the maturity curve

    By Solarina Ho
    TORONTO, Feb 25 (Reuters) - The Canadian dollar strengthened
against the greenback on Wednesday after markets dramatically
scaled back their expectations for another interest rate cut by
the Bank of Canada, while U.S. Federal Reserve Chair Janet
Yellen suggested the Fed is in no rush to raise rates.
    The Canadian dollar reversed four straight sessions of
losses on Tuesday after Bank of Canada Governor Stephen Poloz
said last month's surprise 25-basis-point rate cut had bought
the central bank time to see how the economy responds to the
plunge in the price of oil, a major Canadian export.
    Markets have struggled to interpret the Bank of Canada, and
before Poloz's comments they had priced in a 70 percent or more
chance of another rate cut next week. On Wednesday, that dropped
to less than 30 percent. 
    "This currency move has detached from what had been a great
driver before, which everyone knows is energy, and really it's
all about rates," said Brad Schruder, director, foreign exchange
sales at BMO Capital Markets.
    "You have changing rate expectations in Canada along with
changing rate expectations in the States with the Fed. Those two
factors combined make Canada more appealing."
    The Canadian dollar finished at C$1.2423 to the
U.S. dollar, or 80.50 U.S. cents. That was higher than Tuesday's
North American session close of C$1.2496 to the U.S. dollar, or
80.03 U.S. cents. It had traded as strong as C$1.2395 overnight,
its most robust showing in a week. 
    "Obviously the last 24 hours or so have been a bit of a
perfect storm in terms of the comments we saw from the two
central bank governors in North America yesterday," said Jeremy
Stretch, head of foreign exchange strategy at CIBC World Markets
in London.
    The U.S. dollar dropped in the wake of Yellen's comments
that the Fed was preparing to consider rate hikes "on a
meeting-by-meeting basis" but would provide markets with clearer
signals before it moved.  
    Schruder said the loonie has the potential to appreciate a
couple more cents, adding that if Thursday's U.S. inflation data
for January due comes in weaker than expected and Canadian
inflation data meets expectations, the Canadian dollar could
pick up another half cent.
    Canadian government bond prices were mostly lower across the
maturity curve. The two-year was flat, yielding 0.475
percent, and the benchmark 10-year slipped 3
Canadian cents to yield 1.329 percent.

 (Additional reporting by Andrea Hopkins; Editing by Peter