CANADA FX DEBT-C$ turns higher, rebounds from week low

   * C$ edges up to C$0.9845 per US$, or $1.0157

 * Bonds flat to higher

 * Bernanke says Fed prepared to use tools to spur growth
 (Updates to midafternoon)

 TORONTO, Aug 26 (Reuters) - The Canadian dollar turned
higher against the U.S. currency on Friday afternoon as
investors digested a speech by U.S. Federal Reserve Chairman
Ben Bernanke that had few details on the central bank's options
to provide further stimulus for the struggling U.S. economy.

 Equity markets also turned higher, after initially dropping
steeply, after Bernanke said the U.S. central bank has "a range
of tools" it could use to boost the U.S. economy. He said it
was critical for the U.S. economy's health to reduce long-term
joblessness and he also expressed long-term optimism.
[ID:nW1E7JM00N] [ID:nN1E77P0HL]

 The Canadian dollar initially weakened to a one-week low
against the greenback at C$0.9923 to the U.S. dollar, or
$1.0078, shortly after Bernanke's comments.

 But by 2:38 p.m. (1838 GMT), the currency CAD=D4 had
rebounded to C$0.9845 to the U.S. dollar, or $1.0157, up from
C$0.9868 to the U.S. dollar, or $1.0134, at Thursday's close.

 "The chance of Bernanke coming through with an actual
policy recommendation was quite small," said David Tulk, chief
Canada macro strategist at TD Securities.

 "Initially, as expected, markets reacted negatively, only
to realize that no harm had been done either, so they resumed
their ascent."

 But the turn in sentiment was not full-fledged as
safe-haven assets still found some favor. The price of gold
rose and government bonds, including Canada's, were flat to
higher.

 The two-year bond CA2YT=RR was flat, yielding 1.000
percent, while the 10-year bond CA10YT=RR edged up 10
Canadian cents to yield 2.394 percent.
 (Reporting by Ka Yan Ng; editing by Rob Wilson)