* C$0.9936 vs US$, or $1.0064
* Carney speech as expected, Europe weighs
* Focus turns to FOMC outcome
* Bond prices mostly lower (Updates to close, adds details, comment)
By Andrea Hopkins
TORONTO, Sept 20 (Reuters) - The Canadian dollar closed weaker against its U.S. counterpart on Tuesday, weighed down by worries over Europe and unaffected by a dovish speech by the Bank of Canada chief.
Global stocks and crude oil rose on expectations U.S. Federal Reserve policymakers will act to boost the U.S. economy. [MKTS/GLOB]
But concern lingered about the outlook for Europe after Standard & Poor's cut Italy's credit rating and the International Monetary Fund said Europe's leaders were failing to act decisively enough to resolve the crisis. [ID:nL3E7KK0MS]
"We are still very much in a range and I think that just reflects the fact that investors are still primarily concerned with events in Europe and that is the most important policy implication even on Canada," said David Tulk, chief Canada macro strategist at TD Securities.
Markets have also turned their focus to the U.S. Fed, which wraps up a two-day meeting of its Federal Open Market Committee on Wednesday. The Fed set the stage for a program to buy longer-dated bonds in a bid to keep already-low, long-term interest rates low, if not lower. [FED/AHEAD]
"The market is definitely a little sidelined until we get some details from the Fed," said Shane Enright, executive director of foreign exchange sales at CIBC World Markets.
The Canadian dollar CAD=D4 ended the North American session at C$0.9936 to the U.S. dollar, or $1.0064 U.S. cents, down from Monday's North American session close of C$0.9897 to the U.S. dollar, or $1.0104.
In a speech in New Brunswick, Bank of Canada Governor Mark Carney said external shocks are adding downside risks to the Canadian economy, with euro zone fiscal funding challenges affecting near-term confidence. [ID:nS1E78J116].
The tone of the speech matched the cautious stance the bank has taken lately.
The Canadian dollar held at weaker levels against its U.S. counterpart after Carney's speech and news conference before dipping close to session lows in late trade.
"He's basically preaching the same type of view that the international outlook is quite bleak and conditions are slightly more constructive within Canada, but ultimately there is only a limited window in which Canada can outperform its international peers," Tulk said.
"Our view is that they would prefer to keep the policy rate lower for longer and let fiscal stimulus provide any support in the event the economy needs it."
Canadian inflation data due at 7 a.m. (1100 GMT) on Wednesday is expected to show a moderation in consumer price rises as higher food prices are offset by more modest gasoline prices.
But because of a year-earlier drop in the CPI, the year-on-year inflation rate is seen rising slightly to 2.9 percent. An unexpected jump in the rate could be mildly supportive of the Canadian dollar and hurt bonds. [ID:nS1E78F1M0]
Bond prices ended the day mostly lower.
The two-year bond CA2YT=RR was down 2.5 Canadian cents to yield 0.946 percent, while the 10-year bond CA10YT=RR was down 15 Canadian cents to yield 2.201 percent. The price for longer-data paper rose slightly in late trade. (Editing by Jeffrey Hodgson)