CANADA FX DEBT-C$ falls, bonds firm after Bernanke testimony

* C$ falls to 95.37 U.S. cents

* Bonds prices firm across curve

* Bernanke says Fed to act if soft U.S. recovery falters (Updates to late afternoon after Bernanke testimony)

OTTAWA, July 21 (Reuters) - The Canadian dollar fell from close to a one-week high against the U.S. currency on Wednesday as equity markets and oil prices extended their declines after the U.S. Federal Reserve said the U.S. economy faces “unusually uncertain” prospects.

U.S. central bank Chairman Ben Bernanke, in prepared testimony to the U.S. Senate Banking Committee, also said that the Fed was ready to take further steps to bolster growth if needed. [ID:nWALLIE6DU]

Bernanke’s remarks were largely in line with the minutes of a recent bank policy meeting, but today’s comments served to underscore market worries about the global economic outlook and further soured investor sentiment towards riskier assets.

The Canadian dollar traced declines on North American equity markets, which skidded more than 1 percent, as well as the softening price of oil.

At 3:20 p.m. (1920 GMT), the currency CAD=D4 was at C$1.0485 to the U.S. dollar, or 95.37 U.S. cents, down from Tuesday's finish at C$1.0448 to the U.S. dollar, or 95.71 U.S. cents.

“All he really did was repeat just what the data was telling us and, really, what the last Federal Reserve minutes were,” said Sacha Tihanyi, currency strategist at Scotia Capital. “(But) the most recent equity weakness did cause the (currency’s) biggest weakening spurt of the day.”

The decline wiped out the Canadian dollar’s overnight gains, when it had jumped almost a penny to touch a session high of C$1.0351 to the U.S. dollar, or 96.61 U.S. cents.

Canadian bond prices added to their earlier gains, helped by the sharp declines in North American equities as investors sought the relative safety of government debt.

The two-year bond CA2YT=RR rose 16 Canadian cents to yield 1.518 percent, while the 10-year bond CA10YT=RR gained 31 Canadian cents to yield 3.159 percent. (Reporting by Ka Yan Ng; editing by Rob Wilson)