CANADA FX-C$ edges higher on central bank hopes

* C$ at C$0.9851 vs US$, or $1.0151
    * Matches multi-month high reached last week
    * Hope for Fed, ECB action still supports
    * Quebec elections on Tuesday

    By Solarina Ho
    TORONTO, Sept 4(Reuters) - The Canadian dollar tested recent
highs against the U.S. currency on Tuesday, helped by hopes the
U.S. and European central banks will take action to boost their
economies, with an election in the province of Quebec providing
little direction.
    French-speaking Quebec is heading to the polls today and the
province's separatist Parti Quebecois is expected to return to
    "Surprisingly enough, very few people are talking about that
... I thought it might have more of an impact, but it seems like
the market is very complacent about it," said David Bradley,
director of foreign exchange trading at Scotiabank.
    Instead, the Canadian currency took its cues from abroad.
    The euro hovered near a two-month high against the U.S.
dollar on optimism the European Central Bank will unveil steps
to tackle the region's debt crisis this week. The ECB is meeting
this week to decide on a bond-buying scheme to help lower
Spanish and Italian borrowing costs.  
    The Canadian dollar closed at its strongest level since
April on Friday after Federal Reserve Chairman Ben Bernanke said
the U.S. central bank would take stimulus action as needed and
after data showed the Canadian economy grew at a quicker pace
than expected in the second quarter. 
    At 9:08 a.m. (1308 GMT) the Canadian dollar was at C$0.9851 
versus the U.S. dollar, or $1.0151, stronger than Friday's North
American session close of C$0.9857, or $1.0145. 
    Earlier in the session, it touched C$0.9843, or $1.0160,
matching the high of last week, which was also the strongest
level since May.
    "We tested this level in the low 40s for the third time and
it's holding again," said Bradley.
    "It kind of feels to me as though the next time we have a
test at that level it's going to break a little bit lower," he
    Bradley said recent mergers and acquisition activity, which
has mostly involved foreign players bidding for Canadian
companies, has helped support the Canadian dollar. Talk of
national banks putting more of their reserves into commodity
currencies like the Canadian dollar has also been supportive, he
    Canada's dollar was stronger against most other major
currencies on Tuesday, including the Australian dollar and euro.
    On Wednesday, the Bank of Canada will be announcing its next
interest rate decision, while Canada will be releasing
employment data on Friday. 
    The Bank of Canada is expected to leave interest rates
unchanged, so investors are focused on whether Governor Mark
Carney will change the message that the central bank may need to
hike rates.