* Positive Citigroup memo renews risk appetite
* Canadian dollar rebounds from Sept 2004 low
* Bonds lower as stocks gain (Adds details)
TORONTO, March 10 (Reuters) - The Canadian dollar rose against the U.S. dollar on Tuesday morning, helped in part by slightly higher oil prices and by an upturn in global equity markets after recent weakness.
The rise comes after the Canadian unit fell on Monday to its lowest level versus the U.S. dollar since September 2004 as economic gloom prompted investors to sell riskier assets.
But risk appetite returned on Tuesday as global banking fears were assuaged by news that the chief executive of financial giant Citigroup told employees in a memo that the bank was profitable in the first two months of 2009 and was “confident” about its capital strength after tough internal stress tests.
The memo was enough to lift sentiment across global stocks and helped the Canadian dollar touch a session high at C$1.2780 to the U.S. dollar, or 78.25 U.S. cents.
At 9:30 a.m. (1330 GMT), the Canadian currency was C$1.2834 to the U.S. dollar, or 77.92 U.S. cents, up from Monday’s close at C$1.2991 to the U.S. dollar, or 76.98 U.S. cents.
“The tone this morning is for a weaker U.S. dollar,” said Michael Gregory, senior economist at BMO Capital Markets.
“Stocks are all stronger this morning, bonds are weaker this morning, so it looks like a general tone toward increased risk appetite, which favors the Canadian dollar.”
The Canadian dollar has been tracking the movements on the Toronto stock market recently, partly as a reflection of risk appetite and partly due to the tight links to commodity prices, especially oil, a key Canadian export, that they have in common. Oil CLc1 inched up above $47 a barrel on Tuesday, while the TSX rose more than 1 percent at market open.
Canadian bond prices were lower across the curve as world stocks rose after three straight days of declines. [ID:nLA118651]
New supply continued to be on the radar. Some $63 billion in U.S. government notes and bonds was due to be absorbed this week. The first auction will be $34 billion of three-year T-notes at 11 a.m. (1700 GMT).
The two-year bond slipped 2 Canadian cents at C$103.04 to yield 0.967 percent. The 10-year bond lost 24 Canadian cents to C$106.91 to yield 2.961 percent.
The 30-year bond dropped 55 Canadian cents to C$123.40 to yield 3.663 percent. The U.S. 30-year bond yielded 3.659 percent. (Reporting by Ka Yan Ng; Editing by Peter Galloway)