* C$ moves comfortably off overnight low
* Bond prices pinned lower across curve (Recasts with rise in C$)
By Frank Pingue
TORONTO, Aug 5 (Reuters) - Canada's dollar erased an early fall and gained against the U.S. dollar on Wednesday as its resilience in the face of a warning against undue appreciation by Canadian Finance Minister Jim Flaherty prompted renewed interest.
Flaherty's comments on Tuesday yanked the currency down from its highest level in 10 months. But the impact did not last. [ID:nN04143584]
At 1:15 p.m. (1715 GMT), the Canadian unit was at C$1.0699 to the U.S. dollar, or 93.47 U.S. cents, up from an overnight low of C$1.0785 to the U.S. dollar, or 92.72 U.S. cents.
"Just the fact that the pullback was not necessarily as high as some people were expecting, and that's probably what brought some more (U.S. dollar) selling into the market today," said J.P. Blais, vice president of foreign exchange products, at BMO Capital Markets.
"As history has shown us, whenever we have a finance minister with loose lips trying to come out and help the dollar, it's never been very successful in the medium term."
Blais also said the Canadian dollar was avoiding extended losses because of relative steadiness on equity markets and in prices for oil and commodities, often key influences on the currency.
Flaherty's comments, which followed Bank of Canada remarks last month that it stands ready to take further action to stimulate the economy, had an immediate negative impact on the Canadian currency that extended into the overnight session.
Respondents in a Reuters poll released on Wednesday said Canada's dollar will steadily back off the 10-month high reached earlier this week due to talk of central bank intervention and possible U.S. interest rate hikes. [ID:nN05249342]
BONDS PRICES DOWN
Canadian bond prices remained under pressure as European data helped further hopes that global economic recovery is gaining steam, taking interest away from safe-haven assets such as government debt.
Reports showed the deep recession in the euro zone services economy eased in July, while Britain's services sector posted an unexpected surged in the same month, fueling hopes the economy might have started growing again. [ID:nLAG003649]
The two-year Canadian bond was down 4 Canadian cents at C$99.06 to yield 1.463 percent, while the 10-year bond lost 5 Canadian cents to C$101.75 to yield 3.537 percent.
The 30-year bond fell 25 Canadian cents to C$116.15 to yield 4.029 percent. In the United States, the 30-year Treasury yielded 4.457 percent. (Editing by Peter Galloway)