* C$ lower but off lows
* Bonds soften across curve
* Bank of Canada: Weak housing market could hit economy
* Business optimistic about 2011: central bank says
By Solarina Ho
TORONTO, Jan 10 (Reuters) - The Canadian dollar was lower, but off the day's lows against the greenback on Monday as rising commodity prices and a firmer euro helped give the currency support.
Comments by the Bank of Canada, however, kept gains in check. The central bank's deputy governor, Agathe Cote, said on Monday the weakening Canadian housing market could have a "sizable spillover" effect on other parts of the economy and that Canadian credit was still growing faster than income. [ID:nTOR007938]
Earlier this morning, weaker Chinese data, a falling euro and commodity prices put pressure on the Canadian dollar, which gave back some of last week's gains.
"The currency started weak today, because the euro was under quite a bit of pressure and as were global equity markets," said Doug Porter, deputy chief economist at BMO Capital Markets.
"But since that time, we've seen the currency turn the corner. Our commodity prices are up today. The quarterly survey by the Bank of Canada on the business outlook was solid and generally positive and finally we have seen the euro make a little bit of a recovery from its lows today."
The Bank of Canada said Canadian companies were optimistic about the outlook for the next 12 months even as they expected only modest growth. Oil and mining firms were more upbeat about their sales expectations. [ID:nN10270585]
The price of oil, a key Canadian export, climbed more than 1 percent after a leak shut an Alaskan pipeline that carries 12 percent of the U.S. crude output. [O/R]
At 1:30 p.m. (1830 GMT), the currency CAD=D4 was at C$0.9933 to the U.S. dollar, or $1.0067, down from Friday's North American finish at C$0.9918 to the U.S. dollar, or $1.0083. Earlier, the Canadian dollar hit a low of at C$0.9985 to the U.S. dollar, or $1.0015.
Overseas, the euro recovered some of its losses after hitting a four-month low against the U.S. dollar earlier over Portuguese debt worries. [FRX/]
"That's helped provide a little bit of temporary support. I don't believe this is necessarily a longer-term turning point, but it at least provided a little bit of relief today," Porter said.
Canadian government bond prices declined across the curve.
The two-year bond CA2YT=RR was down 1 Canadian cent to yield 1.717 percent, while the 10-year bond CA10YT=RR was flat at Canadian cents to yield 3.183 percent. (Editing by Peter Galloway)