CANADA FX DEBT-C$ firms as markets steady, oil prices rise

* Canadian dollar at C$1.1242 or 88.95 U.S. cents
    * Bond prices lower across the maturity curve

    By Leah Schnurr
    TORONTO, Oct 17 (Reuters) - The Canadian dollar firmed
modestly against the greenback on Friday, taking its cue from
calmer global markets and a rise in oil prices at the end of a
volatile week.
    The loonie gave a muted reaction to data that showed
Canada's inflation rate came in at the Bank of Canada's target
of 2 percent in September, reinforcing analysts' expectations
that the central bank will maintain its neutral stance in its
policy statement next week. 
    The Canadian dollar was in consolidation phase after being
rocked along with other financial markets this week by worries
over weak global demand and a selloff in oil prices.
    "It will be more financial market developments that will
influence any move in the currency," said Paul Farley, assistant
chief economist at Royal Bank of Canada in Toronto. 
    "If we see any recovery in oil prices, it could result in a
bit of upward pressure on the Canadian dollar."
    The Canadian dollar was at C$1.1242 to the
greenback, or 88.95 U.S. cents, stronger than Thursday's close
of C$1.1248, or 88.90 U.S. cents.
    The C$1.1230 level has been providing support for the U.S.
dollar-Canadian dollar in recent sessions, and if it is unable
to extend below that level, the pairing may see a small squeeze
higher, said Shaun Osborne, chief currency strategist at TD
Securities in Toronto.
    Attention at home was shifting towards the Bank of Canada's
policy statement to be released Wednesday, along with its
updated economic projections. Investors will be looking for any
reaction from the bank to the recent market turmoil.
    Markets were taking some comfort from supportive comments
from central bankers in Europe, as well as a top Fed official
who said Thursday that the Fed may want to keep up its
bond-buying stimulus for now. The program is expected to wind
down later this month. 
    In a speech early Friday, Federal Reserve Chair Janet Yellen
said the growth of income and wealth inequality caused her great
concern. She did not comment on recent market volatility or on
monetary policy.  
    Canadian government bond prices were lower across the
maturity curve, with the two-year down 5 Canadian
cents to yield 0.955 percent and the benchmark 10-year
 down 13 Canadian cents to yield 1.942 percent.

 (Editing by Bernadette Baum)