* Canada's strong fundamentals attracting buyers
* Ends at C$1.0218 to US$, or 97.87 U.S. cents
* Bonds prices flat to lower as stock market gains (Updates to close, adds quotes)
By Jennifer Kwan and Jeffrey Hodgson
TORONTO, May 11 (Reuters) - The Canadian dollar firmed on Tuesday, hitting an eight-year high against a struggling euro, as the country's strong fundamentals relative its Western peers helped spur investor interest.
While no major Canadian economic data was released on Tuesday, analysts said doubts about whether a massive emergency aid package can solve Europe's debt crisis in the long run was enough to push the Canadian currency higher.
"In terms of Canada, risk aversion has decreased. Canada ranks very well on sovereign issues, fundamental issues, the major drivers are still very strong," said Camilla Sutton, currency strategist at Scotia Capital.
The Canadian currency CAD=D4 touched a high of C$1.0149 to the U.S. dollar, or 98.53 U.S. cents, its strongest level against the greenback since May 4.
The currency finished at C$1.0218, or 97.87 U.S. cents, up from C$1.0243 to the U.S. dollar, or 97.63 U.S. cents, at Monday's close. It soared almost 2 percent against its U.S. counterpart on Monday.
Its move against the euro was even more dramatic, with the Canadian dollar rising as high as C$1.2922, or 77.39 euro cents, its strongest level since July 2001.
The euro stumbled as investors had second thoughts about the $1 trillion "shock and awe" emergency aid package recently announced by European authorities. [MKTS/GLOB] [FRX/]
"You've got Canada that is definitely on the upswing as illustrated by our employment numbers, our solid banking system, our relatively low debt-to-GDP ratio. You've got the euro zone that is being anchored down by ... Greece, Portugal, Ireland, Italy and Spain," said Firas Askari, head of foreign exchange trading at BMO Capital Markets.
"The market is still reluctant to buy euro, is still reluctant to view this as a cure-all, so people are divesting out of euro, so a lot of them are picking up the Canadian dollar."
The currency was also supported by firmness in North American equity markets, with Toronto stocks higher in part on strong bullion prices. [.TO]
Brendan McGrath, a foreign exchange trader at Custom House, noted the Canadian dollar also moved past a previous support level of C$1.02 to the U.S. dollar, which sparked further strength.
"If stocks continue to perform well and commodities continue to perform well then we can expect the Canadian dollar to strengthen on the back of that," he said.
BOND PRICES FLAT TO LOWER
With no market-moving data, Canadian government bond prices were flat to lower across the curve as the market took a breather after several days of volatility, said Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment.
"This is just a recovery day after all the volatility we've had," said Dong.
"We've seen some wild gyrations. Today is probably the first session in a long time we've seen relative calm."
The two-year government bond CA2YT=RR fell 5.5 Canadian cents to C$99.09 to yield 1.957 percent, while the 30-year bond CA30YT=RR fell 5 Canadian cents to C$117.70 to yield 3.932 percent.
In supply news, the provinces of Ontario and British Columbia together sold more than C$1 billion in bonds. [CAN-TNC] (Editing by Rob Wilson)