* C$ ticks lower at 95.97 U.S. cents
* Bonds higher, track U.S. Treasuries
* Bank of Canada rate decision on Wednesday
By Jennifer Kwan
TORONTO, Sept 7 (Reuters) - The Canadian dollar edged lower against the U.S. currency on Tuesday as investors shunned riskier assets on weak oil prices and on fresh concerns about the European banking sector.
Oil fell to around $73 a barrel as the dollar strengthened and Tropical Storm Hermine showed no signs it would disrupt crude or refining output as it came ashore near the Mexico-Texas border. [O/R]
World stocks were lower while the euro fell broadly after a Wall Street Journal report said Europe's recent "stress tests" of the strength of major banks underestimated some lenders' holdings of potentially risky government debt. [MKTS/GLOB]
"We're starting our holiday-shortened week on a defensive turn with risk aversion returning largely on the back of increased concerns in Europe," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"There's a bit of refocusing on the European issues. During the summer it fell off the radar screen, and the market was more focusing on data and news coming out of the United States."
At 7:43 a.m. (1143 GMT), the Canadian dollar was at C$1.0420 to the U.S. dollar, or 95.97 U.S. cents, down from Friday's Bank of Canada closing level at C$1.0393 to the U.S. dollar, or 96.22 U.S. cents.
The currency's move lower on Tuesday follows a rally late last week on better-than-expected U.S. jobs data, supporting expectations the Bank of Canada will raise interest rates this week. [CAD/]
The Bank of Canada decides on interest rates on Wednesday in one of the closer calls in some time. [CA/POLL] [ID:nN01259189]
Strauss said the next key technical levels to watch out for included support at C$1.0326 to the U.S. dollar and resistance at C$1.0474.
Canadian bond prices were higher across the curve, tracking U.S. Treasuries on Tuesday on worries about the health of European banks. [US/]
The two-year Canada bond CA2YT=RR was up 6 Canadian cents to yield 1.347 percent, while the 10-year bond CA10YT=RR rose 25 Canadian cents to yield 2.917 percent. (Editing by Padraic Cassidy)