CANADA FX DEBT-C$ weakens after Poloz says bank focused on currency's movements

 (Adds analyst quotes, details on Poloz's prepared remarks and
updates prices)
    * Canadian dollar at C$1.2413, or 80.56 U.S. cents
    * Touches its weakest level since Sept. 1 at C$1.2433
    * Canada-U.S. 2-year spread narrows by 5.9 basis points

    By Fergal Smith
    TORONTO, Sept 27 (Reuters) - The Canadian dollar weakened to
near a four-week low on Wednesday against its broadly stronger
U.S. counterpart while short-term bond yields fell after Bank of
Canada Governor Stephen Poloz struck a cautious note about the
    Poloz, in prepared remarks for a speech on Canada's economy,
said the central bank will closely watch movements in
longer-term interest rates and the exchange rate as it considers
how to follow its two recent rate hikes.             
    The mention of the currency is the "big takeaway," said Eric
Theoret, currency strategist at Scotiabank.
    The loonie has rallied more than 8 percent this year. A
further rapid appreciation of the loonie could put the brakes on
the country's economy just as it is gaining momentum.
    Chances of a another Canadian rate hike this year fell to 83
percent from almost 100 percent before the release of Poloz's
remarks, overnight index swaps data showed.           
    The central bank governor will hold a press conference at
12:55 p.m. ET (1655 GMT).
    At 12:26 p.m. ET (1626 GMT), the Canadian dollar         
was trading at C$1.2413 to the greenback, or 80.56 U.S. cents,
down 0.5 percent.
    The currency's strongest level of the session was C$1.2336,
while it touched its weakest since Sept. 1 at C$1.2433.
    The U.S. dollar        rose to more than a one-month high
against a basket of currencies, as optimism about U.S. fiscal
reforms boosted sentiment in favor of the greenback.
    Prices of oil, one of Canada's major exports, edged higher,
helped by an unexpected drop in U.S. crude inventories. U.S.
crude        prices were up 0.37 percent at $52.07 a barrel.
    U.S. crude        prices were up 0.37 percent at $52.07 a
    Canadian government bond prices were mixed across the yield
curve, with the two-year            price up 7 Canadian cents to
yield 1.569 percent and the 10-year             falling 8
Canadian cents to yield 2.123 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed by 5.9 basis points to a spread of 9.4 basis

 (Reporting by Fergal Smith; Editing by Nick Zieminski and Paul