* C$ up at C$1.0249 vs US$, or 97.57 U.S. cents
* Currency outperforms most G10 currency peers
* Bonds mixed across curve
TORONTO, June 11 (Reuters) - Canada's dollar got a lift on
Monday as a wave of buying swept financial markets after a
rescue package for Spain's frail banking sector eased some
concerns about the euro zone debt crisis.
The Canadian dollar rose to C$1.0202 against the
U.S. dollar, its strongest since May 22, following the weekend
deal by the 17-nation currency area to lend Madrid up to 100
billion euros ($125 billion) for its bank rescue fund, more than
an initial audit suggests it is likely to need, in an attempt to
reassure investors and erect a new firewall in the crisis.
But by Monday morning markets pared gains with investors
worried about how the bailout would be financed, while there was
also fear Greek elections on Sunday could put Athens on a path
to leaving the currency bloc.
"Initially risk appetite soared as Spain announced that they
are planning on moving forward and asking for outside funding
for the banking system," said Camilla Sutton, chief currency
strategist at Scotiabank.
"However, the rally seems to be fading a bit as tremendous
uncertainty for Europe remains."
At around 8:00 a.m. (1200 GMT), the Canadian dollar was at
C$1.0249 against the U.S. currency, or 97.57 U.S. cents, off its
high but still up from C$1.0270 versus the greenback, or 97.37
U.S. cents.
The euro rose more than 1 percent to hit a three-week
high of $1.2672 in Asian trade, pulling away from a near
two-year low of $1.2288 hit earlier this month.
Also supporting the Canadian currency was strength in the
price of oil, gold and base metals, all higher on the Spanish
bank deal.
The currency outperformed most of its G10 currency peers
including the euro and the New Zealand and Australian dollars,
but Sutton said broader uncertainty around the euro zone would
likely cap gains.
"At this point, it's probably pretty unlikely we move to the
lows in dollar/Canada of C$1.0201 so I would say
C$1.0220-1.0280," she said.
With no significant data set for release on Monday,
investors would look to Europe developments and a string of
talks by North American central bankers for market guidance.
Canadian bond prices were mixed with the two-year bond
off 3 Canadian cents to yield 1.054 percent, while
the benchmark 10-year bond was unchanged, yielding
1.811 percent.