* C$ closes at C$0.9597, or $1.0420
* Bond prices mostly lower across curve
* 2-yr bond auction met with firm demand
TORONTO, July 13 (Reuters) - The Canadian dollar powered higher against its U.S. counterpart on Wednesday as dovish comments from U.S. Federal Reserve Chairman Ben Bernanke and bullish Chinese economic data calmed markets made anxious by Europe's sovereign debt crisis.
Bernanke said the Fed is ready to ease monetary policy further if the economy weakens and inflation moves lower, suggesting policymakers are actively mulling further stimulus. The comments sent the U.S. dollar sharply lower. <MKTS/GLOB> [USD/]
Data on Wednesday showed China's economy grew faster than expected in the second quarter, easing fears of a hard landing and strengthening Beijing's resolve to fight persistently high inflation. [ID:nL3E7ID0AS]
"The combination of stronger-than-expected growth out of China and a very dovish Bernanke, who has opened the door ever so slightly to the potential of QE3 (further stimulus), and some easing of risk coming out of Europe -- all that's created a good environment for CAD to rally," said Camilla Sutton, chief currency strategist at Scotia Capital.
"CAD held in very, very well during the recent spike up in risk (aversion) that saw a lot of weakness in the euro. So in many ways, it also makes sense that even though we've gained today, we've underperformed," she said.
The currencyfinished at C$0.9597 to the U.S. dollar, or $1.0420, up from Tuesday's North American finish of C$0.9662, or $1.0350. The currency rose as high as C$0.9578, or $1.0441, during the session.
The Canadian dollar strengthened further after the official Bank of Canada close, to C$0.9572, or $1.0447, on news that ratings agency has Moody's put its U.S. ratings on review for possible downgrade. [ID:nWNA3574]
Commodity prices -- oil in particular -- pressed higher, and also helped to drive Canadian dollar gains. Canada relies heavily on resource exports and its currency is affected by swings in commodity prices. [O/R]
The Thomson Reuters-Jefferies Index, a global commodities benchmark, was up 1.43 percent on Wednesday.
A Reuters survey published on Wednesday found forecasters expect the Bank of Canada to raise interest rates sometime in the fourth quarter as a sturdy, if unspectacular, domestic recovery offsets global headwinds. <CA/POLL>
A tightening of monetary policy by the Bank of Canada would likely help attract foreign capital, and drive the Canadian dollar higher.
"The only headwinds that the Canadian economy is facing are nondomestic in nature," said Firas Askari, head of foreign exchange trading at BMO Capital Markets. "I think if we see some sort of stabilization on the global scale you are going to see monetary policy shift here and probably shift relatively quickly.".
Looking ahead, U.S. June retail sales data on Thursday morning could be the next driver for the currency.
"Jobs numbers in the United States have been far from encouraging, so we're looking now at retail sales, as maybe this is the point where we have to start taking a haircut to our second half outlook to the United States," said David Watt, senior fixed income and currency strategist at RBC Capital Markets. "That will have an impact on the Canadian dollar to an extent."
BOND AUCTION "WELL RECEIVED"
Canada's sale of two-year government bonds on Wednesday met with firm demand. The C$3.5 billion auction produced an average yield of 1.576 percent, up from 1.572 percent at the last two-year bond auction in June. [ID:nN1E76C15M]
Canadian government bond prices were mostly lower across the curve as investors moved to risker assets.
The two-year bondwas flat, yielding 1.448 percent, while the 10-year bond shed 28 Canadian cents to yield 2.927 percent. (Additional reporting by Trish Nixon; editing by Peter Galloway)
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