* C$ charges off overnight low of C$1.1077
* Canada's trade deficit shrinks in June
* Bond prices stuck lower across curve (Recasts)
By Frank Pingue
TORONTO, Aug 12 (Reuters) - Canada's currency closed higher versus the U.S. dollar on Wednesday, snapping a four-day skid, as rises in oil prices and North American stocks helped renew interest in riskier currencies.
The Canadian dollar handed back some of its gains after the U.S. Federal Reserve said it would slow the pace of its program to purchase long-term debt, but the currency reclaimed the bulk of that drop and secured a comfortably higher close.
"What we're seeing is a reversal of the past couple trading sessions where we saw risk off and U.S. dollar bid scenarios no matter what was coming out," said Firas Askari, head of foreign exchange trading at BMO Capital Markets.
The Canadian dollar closed at C$1.0884 to the U.S. dollar, or 91.88 U.S. cents, up from C$1.1015 to the U.S. dollar, or 90.79 U.S. cents, on Tuesday.
That was also up from the overnight low of C$1.1077 to the U.S. dollar, or 90.28 U.S. cents, which was the currency's lowest level in three weeks.
But Askari noted that there is very little liquidity in the market given the generally quiet August trading period, which he said was likely contributing to the big swings in direction for the Canadian dollar.
It took a sharp swing lower around mid-afternoon after the Fed said the U.S. economy was showing signs of leveling out after 20 months of recession [ID:nN12462568]
The bulk of the Canadian dollar's latest rise came during the first half of the North American session, when it rose to C$1.0848 to the U.S. dollar, or 92.18 U.S. cents.
"Judging by the moves that happened earlier this morning it seemed like there was just a couple of involved sellers (of the U.S. dollar)," said David Bradley, director of foreign exchange trading at Scotia Capital.
"I don't know if it was M&A related or what, but it seemed like a couple of Canadian banks were the main sellers of the U.S. dollar and buyers of the Canadian dollar."
Also aiding the domestic currency's rise was data that showed Canada's trade deficit came in at a much smaller than expected C$55 million in June, compared with C$1.1 billion in May. [ID:nN12380828]
BOND PRICES END MIXED
Canadian bond prices ended higher at the short end of the curve as the Fed said it would keep its short-term interest rate steady near zero for an extended period, but the long end of the curve eased on the Canadian trade data.
"The trade numbers are somewhat favorable for growth and therefore we had equities rallying as well and that all put a negative tone and pushed ... up yields at the long end," said Michael Gregory, senior economist at BMO Capital Markets.
Gregory also said the short end of the curve rose alongside shorter-dated U.S. Treasuries as any hope that the Fed could raise interest rates early next year faded after its statement showed it was in no hurry to do anything to change policy.
The two-year Canadian bond ended up 5 Canadian cents at C$99.35 to yield 1.325 percent, while the 10-year bond slipped 14 Canadian cents to C$101.91 to yield 3.517 percent.
The 30-year bond dropped 25 Canadian cents to C$116.70 to yield 3.999. In the United States, the 30-year bond yielded 4.523 percent.
Canadian bonds outperformed their U.S. counterparts across most of the curve. The Canadian 30-year bond was about 52 basis points below the U.S. 30-year yield, versus 45.4 basis points below on Tuesday. (Editing by Peter Galloway)