* C$ at C$1.0212 vs US$, or 97.92 U.S. cents * Bond prices mostly higher * January GDP key data this week By Alastair Sharp TORONTO, March 25 (Reuters) - The Canadian dollar held on to slight gains against the U.S. dollar on Monday, initially buoyed by a rescue deal between Cyprus and its lenders but then hobbled by fears of broader weakness in Europe's banks. Cyprus agreed to shut down its second-largest bank and imposed heavy losses on big depositors to secure a 10-billion euro rescue plan, a deal a senior euro zone official said could become a template for other regional banking problems. "Everything shifted rather quickly during the North American session and (Dutch Finance Minister Jeroen) Dijsselbloem's comments that this was a template for other bank restructuring sent markets into a tailspin," said Matt Perrier, managing director of foreign exchange sales at BMO Capital Markets. Such an approach would mark a radical departure for euro zone policy after three years of crisis in which taxpayers across the region have effectively been on the hook for resolving problem banks and indebted governments. At one point the loonie, as Canada's currency is colloquially known, touched C$1.0188, its best performance in a week. "It spent a good part of the morning grinding back up into the 1.0220s and was stuck in a range the whole afternoon," said David Bradley, director of foreign exchange trading at Scotiabank. The currency ended the session at C$1.0212 versus the greenback, or 97.92 U.S. cents, still stronger than Friday's North American session close at C$1.0233, or 97.72 U.S. cents. "The relief for the euro at least for the Cyprus deal has been very short-lived," said Charles St-Arnaud, economist and currency strategist at Nomura Securities in New York. "It seems like investors are turning back to looking at the broad issue of the euro zone. The Cyprus deal is good news, but the rest of the zone is still (in trouble)." Worries about an economic slowdown in the currency bloc, political uncertainty in Italy, and prospects of the European Central Bank easing monetary policy in coming months to support growth were also expected to weigh on the currency. The single currency lost more than two Canadian cents to reach its weakest level since mid-January. The key data this week for the Canadian dollar will most likely be inflation data on Wednesday and the monthly gross domestic product figures on Thursday. "For what we've seen so far for January, growth will be relatively weak, said St-Arnaud, who is expecting no growth at all in January. "That will probably bring the focus for investors to the Canadian economy, that it's not as strong as it was only a year ago." In addition on the domestic front, a Bank of Canada deputy governor speaks on Tuesday and inflation data are due on Wednesday, but BMO's Perrier expected Cyprus to remain a focus. "We've got a few domestic things to keep our eye on, but for the most part the market focus is going to be on Cyprus and any fallout from developments there," he said. The loonie has come off a weak C$1.0343 level from early in March but will likely struggle to push past C$1.0185 to C$1.0125 over the course of this week, Perrier said. Data released by the Commodity Futures Trading Commission on Friday showed traders had once again increased their short positions in the Canadian dollar, indicating an expectation that the currency will weaken. Prices for Canadian government debt were mostly higher across the curve, though the two-year bond was off half a Canadian cent to yield 0.997 percent. The benchmark 10-year bond added 9 Canadian cents to yield 1.810 percent.