* C$1.0402 vs U.S. dollar, or 96.14 U.S cents
* Europe bank package, U.S. data buoy risk sentiment
* Bond prices fall (Updates to close, adds comment)
By Andrea Hopkins
TORONTO, Oct 5 (Reuters) - The Canadian dollar gained more than a cent against its U.S. counterpart on Wednesday as progress on the European debt crisis and decent economic data from the United States boosted risk appetite.
Global stocks and oil prices rebounded on hopeful signs that authorities are moving to prop up Europe's ailing banking sector to prevent a full-blown financial crisis. [MKTS/GLOB]
The rally, spurred further by data on the U.S. services sector and private-sector business activity showing a slowing but still-growing U.S. economy, helped boost riskier assets and commodity-linked currencies like the Canadian dollar.
"We're just being swept up in the broader feel of the markets. Equity markets are higher, commodities are higher, most of the other commodity currencies are doing well," said Camilla Sutton, chief currency strategist at Scotia Capital.
"The one percent gain in the Canada dollar is really just a reflection of risk appetite improving -- and most of that is a reflection of some recognition from European authorities that a bank recapitalization was in order."
The Canadian dollar CAD=D3 ended the North American session at C$1.0402 to the U.S. dollar, or 96.14 U.S. cents, just off the session high and well above Tuesday's North American session close at C$1.0549 to the U.S. dollar, or 94.80 U.S. cents.
While the currency briefly climbed as high as C$1.0397 to the U.S. dollar, or 96.18 U.S. cents, near the end of trading, Sutton said the strength was likely to be short-lived, as global uncertainties remain entrenched.
"Even though we've had a great day today, it is not really substantiated on very much, because a slight shift in tone coming from Europe (will change sentiment)," Sutton said.
"I fear we're likely still moving towards a weaker Canada dollar in the very near term, before it really has the ability to retrace its losses into year end."
A Reuters poll released on Wednesday showed the Canadian dollar is expected to recover from 13-month lows to return to equal value with the U.S. dollar in six months' time, though projections are not as buoyant as they were before September's global meltdown. [CAD/POLL]
Median forecasts in a poll of 48 global foreign exchange strategists released showed the currency is seen at C$1.04 to the U.S. dollar, or 96.15 U.S. cents, one month from now, well above the 13-month low of C$1.0658 to the U.S. dollar, or 93.83 U.S. cents reached this week.
The Canadian dollar is expected to continue to strengthen, climbing to C$1.02 in three months, C$1.00 in six months and through parity to C$0.98 in a year's time, the poll showed.
Canada's dollar sank through parity with the U.S. greenback in September and has mostly declined since, as investors shift to the liquidity and security of the U.S. dollar as the European crisis and fears of a global slowdown persist.
U.S. and Canadian employment data, due on Friday, will be watched for signs of economic growth, and Sutton said markets will focus on Jean-Claude Trichet's last meeting as president of the European Central bank on Thursday. ECONCA
Bond prices were lower across the board on Wednesday. The two-year Canadian government bond CA2YT=RR lost 3.5 Canadian cents to yield 0.899 percent, while the 10-year bond CA10YT=RR lost 23 Canadian cents to yield 2.125 percent.
Canada's sale of 10-year government bonds saw strong demand on Wednesday, as fears about Europe's debt crisis and possible global recession fueled investor hunger for safe-haven assets. [ID:nN1E79417M] (Editing by Jeffrey Hodgson)