* C$ touches high of 98.31 U.S. cents
* US$ slides on belief Fed will ease monetary policy
* Bond prices flat across curve (Adds details, adds quote)
By Jennifer Kwan
TORONTO, Oct 5 (Reuters) - Canada's dollar climbed against the U.S. currency on Tuesday after the Bank of Japan surprised markets by taking steps to ease credit to bolster economic recovery, stoking speculation that the U.S. Federal Reserve would follow.
The Bank of Japan pledged to pump more funds into the struggling economy and keep rates almost at zero, pushing the yen lower and world stocks higher. Australia also surprised markets by refraining from a rate hike. [MKTS/GLOB] [ID:nTOE69305D]
Those central bank moves added to the growing belief that the Fed will ease monetary policy further, which helped to send the greenback to an 8-1/2 month low against a basket of currencies on Tuesday. [FRX/]
"The market has shifted from no longer looking at whether the Fed is going to introduce quantitative easing, but more looking at now what it will look like," said Camilla Sutton, chief currency strategist at Scotia Capital.
"It's just a question of how much and how it will be implemented."
At 9:53 a.m. (1353 GMT), the Canadian currency CAD=D4 was at C$1.0189 to the U.S. dollar, or 98.15 U.S. cents, after earlier rising as high as C$1.0172, or 98.31 U.S. cents, its highest level since Aug. 6.
On Monday, the currency closed at C$1.0220 to the U.S. dollar, or 97.85 U.S. cents.
Also supporting the Canadian dollar was the price of oil CLc1, a key Canadian export, which rose above $82 a barrel, while gold prices XAU= touched a record above $1,330.90 an ounce. [O/R] [GOL/]
"Risk appetite is increasing, which has helped commodities with oil over $82 and gold at a new high. Equities are higher as well. All that is factoring into a weaker U.S. dollar and a stronger CAD," Sutton said.
Canadian government bond prices were largely flat, with the two-year bond CA2YT=RR up 1 Canadian cent to yield 1.357 percent, while the 10-year bond CA10YT=RR ticked 4 Canadian cents higher to yield 2.748 percent. (Editing by Peter Galloway)