CANADA FX DEBT-C$ softer as focus turns to Bernanke testimony

* C$ at C$1.0268 versus US$ or 97.39 U.S. cents
    * U.S. dips after comments by Fed officials on Tuesday
    * Fed chairman Bernanke to speak on Wednesday
    * Bond prices higher across the curve

    By Solarina Ho
    TORONTO, May 21 (Reuters) - The Canadian dollar softened
against its U.S. counterpart on Tuesday but was off its session
low after comments by U.S. Federal Reserve officials trimmed
expectations that the U.S. central bank might rein in its
ultra-easy monetary policy. 
    Two senior Fed officials played down the chances that the
central bank would signal a readiness to curtail its bond buying
program at its meeting next month, dampening earlier speculation
spurred by persistent talk from more hawkish Fed officials.
    "It's definitely the talk du jour - whether or not the Fed
will begin to taper. The market does have a ... sort of
expectation that they will start to talk about tapering a little
bit sooner," said Mazen Issa, macro strategist at TD Securities.
    "Our general view is that, it's still a little bit early to
start talking about it...but the market is definitely keeping
their ears open."
    The U.S. dollar slipped on the latest Fed comments. 
    The Canadian dollar finished the session at
C$1.0268 versus the U.S. dollar, or 97.39 U.S. cents, weaker
than Monday's finish of C$1.0241, or 97.65 U.S. cents. Earlier,
it touched C$1.0321, or 96.89 U.S. cents, its lowest level since
March 7.
    Canadian equity and bond markets were closed on Monday for
the Victoria Day holiday, leaving most trading desks at Canadian
banks unstaffed.
    The currency was up from Friday's North American finish of
C$1.0291, or 97.17 U.S. cents. It shed about 1.8 percent of its
value against the greenback last week.
    U.S. Federal Reserve Chairman Ben Bernanke will testify
before Congress on Wednesday and market watchers will parse his
comments for hints on the direction of Fed policy.
    "It seems like they've got a bit of a sustained PR campaign
going on it, and the market is reacting accordingly," said John
Curran, senior vice president at CanadianForex.
    Curran noted that Bernanke himself has not made any comments
so far. The U.S. dollar may weaken if Bernanke reiterates his
ultra-loose monetary policy stance, but is likely to strengthen
further if he provides some hint that asset purchases could be
wound down later this year.
    In Canada, retail sales figures on Wednesday are the only
domestic data before the Bank of Canada issues its next rate
announcement next week. The bank is expected to hold rates
    Analysts polled are expecting a 0.1 percent increase in
retail sales in March.
    "There's probably some scope for some weakening in the
Canadian dollar just given that our expectation is that we're
actually going to see a modest decline in retail sales. The
market's just looking for a very modest positive," Issa said.
    The price of Canadian government debt was generally higher
across the curve. The two-year bond was flat, with a
yield of 1.010 percent, while the benchmark 10-year bond
 rose 12 Canadian cents to yield 1.913 percent.