* C$ up 0.7 percent from Friday's close
* Several currencies hit yearly high against weaker US$
* Concern over Bank of Canada reaction to higher C$
By John McCrank
TORONTO, Sept 8 (Reuters) - The Canadian dollar CAD CAD=D3 hit a five-week high against a waning U.S. dollar on Tuesday, helped by rallies in commodity prices and equities, but it lost some steam amid concern about a meeting of the Bank of Canada later in the week.
The surge in the Canadian dollar, which reached its high in the overnight session of C$1.0674 to the greenback, or 93.69 U.S. cents, came alongside a number of other currencies that took advantage of increased investor appetite for riskier assets.
"A whole host of currencies broke to new year-to-date highs (against the greenback), and I think that just fed upon itself," said Camilla Sutton, a currency strategist at Scotia Capital.
"The sentiment that we're getting from the investor base is that they're in risk-seeking mode and that as they come back to their desks after summer vacation, they're really trying to put a little more risk on the books and that that's helping commodities, currencies, equities, and really weighing on the U.S. dollar."
The price of gold XAU= broke above the psychological $1,000 an ounce mark and U.S. crude futures CLc1 rose over 4 percent to settle at $71 a barrel, as investors looked for hedges against the weaker U.S. dollar and against inflation. [GOL/][O/R]
Canada is a major exporter of commodities, the prices of which often influence the value of its currency.
The Canadian dollar closed at C$1.0794 to the U.S. dollar, or 92.64 U.S. cents, up 0.7 percent from C$1.0867 to the U.S. dollar, or 92.02 U.S. cents, at Friday's close.
The Bank of Canada did not offer a closing level for the currency on Monday as North American financial markets were closed for Labor Day.
The Canadian dollar hit its highs in the overnight session, but as the day wore on, it retraced most of its steps and ended up underperforming other major currencies.
"The market is looking at the Bank of Canada meeting on Thursday and is concerned about what might be said about the Canadian dollar," said Sutton.
The Bank of Canada will keep up pressure on markets to back off the rising Canadian dollar this week, analysts predict, but it may also express confidence in its view that the economy is bouncing back. [ID:nN08189274]
At the central bank's last meeting, on July 21, it said that the strong Canadian dollar was moderating the pace of the country's growth. Since then, the currency has appreciated further.
"There's a real risk that they increase their rhetoric, (which could weaken the currency)," said Sutton.
BOND PRICES MOSTLY WEAKER
Canadian bond prices were mostly lower, as investors put their cash in the riskier, but potentially more lucrative equity markets.
The S&P/TSX composite index .GSPTSE ended up 0.8 percent at 11,105.30, while the Dow Jones industrial average .DJI closed up 0.6 percent at 9,497.34.
"Equity markets primarily are providing most of the weaker impetus for the long end (of the bond market)," said Mark Chandler, fixed-income strategist at RBC Capital Markets.
The only piece of Canadian data out was on building permits for June. While it came much weaker than expected, it was not enough to support safe-haven buying of government debt, as the lower print was mainly due to a civic workers' strike in Toronto, which kept permit offices closed. [ID:nOTT001699]
The two-year bond CA2YT=RR was up 3 Canadian cents at C$99.48 to yield 1.268 percent, while the 10-year bond CA10YT=RR shed 26 Canadian cents to C$102.80 to yield 3.408 percent.
The 30-year bond CA30YT=RR fell 74 Canadian cents to C$117.86 to yield 3.935 percent.
Canadian bonds outperformed their U.S. counterparts. The Canadian 10-year bond yield was 7.3 basis points below its U.S. counterpart, compared with 6.8 basis points on Friday. (Editing by Jeffrey Hodgson)
