* C$ higher at 98.12 U.S. cents
* Near highest level since earlier August
* Bond prices flat across curve
By Jennifer Kwan
TORONTO, Oct 5 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Tuesday as investor risk appetite rose, lifting commodity and equity prices, and as the greenback sank on growing expectations that the U.S. Federal Reserve will ease monetary policy further.
"Risk appetite is increasing, which has helped commodities with oil over $82 and gold at a new high. Equities are higher as well. All that is factoring into a weaker U.S. dollar and a stronger CAD," said Camilla Sutton, chief currency strategist at Scotia Capital. [O/R] [GOL/]
The Bank of Japan's surprising and aggressive action to pump more funds into the flagging economy pushed the yen lower and world stocks higher. The BOJ's measures include cutting its overnight rate target to virtually zero and pledging to buy 5 trillion yen ($60 billion) worth of assets. [MKTS/GLOB] [ID:nTOE69305D]
"The market has shifted from no longer looking at whether the Fed is going to introduce quantitative easing, but more looking at now what it will look like," said Sutton.
"It's just a question of how much and how it will be implemented."
At 8:58 a.m. (1258 GMT), the Canadian currency CAD=D4 was at C$1.0192 to the U.S. dollar, or 98.12 U.S. cents, up from Monday's close at C$1.0220 to the U.S. dollar, or 97.85 U.S. cents.
Sutton said key short-term technical levels include C$1.0180 to the U.S. dollar and C$1.0280.
Canadian government bond prices were largely flat, with the two-year bond CA2YT=RR up 1 Canadian cent to yield 1.310 percent, while the 10-year bond CA10YT=RR ticked 1 Canadian cent higher to yield 2.751 percent. (Editing by Jeffrey Hodgson)