TORONTO (Reuters) - The Canadian dollar hit its highest and lowest points of the session against the US currency yesterday after the US Federal Reserve said it stood ready to help the economy if needed.

The Fed, which made no shift in monetary policy at the end of its one-day meeting, as expected, said it was prepared to provide additional support to bolster a U.S. modest economic recovery.

The currency briefly dropped to C$1.0332 to the US dollar, or 96.79 US cents, then turned convincingly higher as investors exited the greenback, while US stock indexes turned positive for a bit. Canada's dollar jumped as high as C$1.0217 to the US dollar, or 97.88 US cents.

It pared gains to end the session at C$1.0268 to the US dollar, or 97.39 US cents, up from Monday's close at C$1.0293, or 97.15 US cents.

"The market is diversifying away from the US dollar as far as a safety holding, and we saw immediate evidence of that with the way that the Dow shot up and interest for the other currencies took place," said said CJ Gavsie, managing director of foreign exchange sales at BMO Capital Markets.

Gavsie said a close below C$1.0185 to the US dollar could indicate a new opportunity for a run towards parity with the greenback, but "until we see that, we're not incredibly convinced that we're breaking out of the range just yet."

Earlier, data showed Canada's annual inflation rate slowed in August, suggesting the Bank of Canada may suspend its rate-hiking campaign.

The overall inflation rate eased to 1.7 percent last month from 1.8 percent in July. Analysts surveyed by Reuters had expected a slightly higher annual rate of 1.9 percent. The core rate was 1.6 percent in August, unchanged from July.

The tame inflation figures mean third-quarter inflation, calculated on a annual basis, would likely be slightly lower than the Bank of Canada's July forecast of 1.8 percent, analysts said.

This could give the central bank more reason to pause after raising its benchmark interest rate three times since the start of June. The overnight rate currently stands at one percent.

"We still think (the Bank of Canada is) going to pass in October and pass again in December. Realistically, it's not really an inflation story, it's more a growth story and a US growth story as well," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.