* C$ at C$1.0068 vs US$, or 99.31 U.S. cents
* Europe optimism, China PMI spurs risk appetite
* Bond prices mostly higher
By Andrea Hopkins
TORONTO, Oct 24 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Monday as investors bet on a positive outcome to the euro zone debt crisis and data from China came in strongly, spurring gains in riskier assets.
The safe-haven U.S. dollar was weaker against a basket of major currencies and world stocks gained after a weekend meeting of policymakers in Brussels, where agreements were near on bank recapitalisation and on how to leverage the European Union's EFSF rescue fund to try to stop bond market contagion. [MKTS/GLOB]
"We've seen a reasonable degree of risk momentum play out through the majority of the morning here in Europe, not just predicated on hopes and expectations that maybe European leaders will get to a deal by the middle of the week," said Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London.
"Certainly the seeming agreement on bank recapitalization is not a bad thing but I think the other factors was the flash PMI from China, which also was encouraging for both risk and/or commodity related dynamics, so that also provided a little bit of a lift to the Canadian dollar."
At 7:33 a.m. (1133 GMT), the Canadian dollar CAD=D3 stood at C$1.0068 to the U.S. dollar, or 99.31 U.S. cents, just above Friday's North American session close at C$1.0087 to the U.S. dollar, or 99.14 U.S. cents.
The currency had strengthened as high as C$1.0050 in early trade in Europe but could not get through the C$1.0044 lows reached last week, and Stretch said that level was an obvious target in the near term.
"There is also a fairly good technical level down in the low parity 30s, so that's probably going to limit the extent of downside risk unless we get another big bounce in risk appetite in the afternoon session here in Europe," Stretch said.
Stretch said markets remained skittish amid constant rumour about the next development in euro zone debt talks, alert to any news Wednesday's summit could be postponed.
"There's still a great deal of uncertainty and nervousness in terms of the euro zone story and I think that's keeping investors, to an extent, on the sidelines."
Final decisions by policymakers were deferred until a second summit on Wednesday and sharp differences remain over the size of losses private holders of Greek government bonds will have to accept.
Caution over Europe was offset by a sharp rise in China's flash purchasing managers' index, suggesting that manufacturing in the world's second-largest economy expanded moderately in October after three months of contraction. [ID:nL3E7LL1AE]
This will have eased fears that China's economy is heading for a hard landing, one of the major concerns for global investors along with the euro zone crisis and the slowdown in the United States.
Canadian government bond prices were mostly higher across the board. The two-year Canadian government bond CA2YT=RR was up 2 Canadian cents to yield 1.073 percent, while the 10-year bond CA10YT=RR rose 10 Canadian cents to yield 2.354 percent.
(Editing by Chizu Nomiyama)