* C$ at C$1.0148 vs US$, or 98.54 U.S. cents
* Bond prices track U.S. Treasuries lower
By John McCrank
TORONTO, Oct 12 (Reuters) - The Canadian dollar rose to its highest level against the U.S. dollar in almost three weeks on Wednesday morning as risk appetite grew on hopes that a crisis in the euro zone will be averted.
The euro hit a three-week high against a weaker greenback and global stocks rallied as investors unwound safe-haven bids. [nL5E7LC0L7]
"The combination of an improving economic outlook, a more positive outlook for the euro, and optimism toward a year-end equity rally is going to put people into buying into risk-on trade, so that probably means people are going to be buying Canada," said Michael O'Neill, vice president of FX Trading, at RJOFX Canada.
At 10:19 a.m. (1419 GMT), the Canadian dollar CAD=D3 was at C$1.0148 against the U.S. dollar, or 98.54 U.S. cents, its highest level since Sept. 22. That was up from Tuesday's North American close of C$1.0279 to the U.S. dollar, or 97.29 U.S. cents.
O'Neill said he expects the currency to trade in a range of C$0.9980 and C$1.0230 for rest of the week.
Canada is a major exporter of commodities, which have been under pressure in recent months as fears over the state of the global economy put demand into question, but on Wednesday hopes that a deal will soon be struck to expand the euro-zone's rescue fund helped spark a rally.
Gold prices XAU= were up 1 percent at over $1,680 and ounce in response the the weaker U.S. dollar, while U.S. crude futures rallied to over $86 a barrel on the back of euro zone data that indicated the third-quarter economic slowdown there may not have been as sharp as feared [O/R]
On the Canadian data front, new home prices edged up 0.1 percent in August for the second straight month, showing more moderate increases than in the second quarter, according to Statistics Canada. [nN1E79B04U]
Bond prices drifted lower across the board, tracking U.S. Treasuries, as fears about Europe's debt crisis receded. [US/]
The two-year Canadian government bond CA2YT=RR lost 6 Canadian cents to yield 1.016 percent, while the 10-year bond CA10YT=RR dropped 53 Canadian cents to yield 2.360 percent. (Reporting by John McCrank; editing by Peter Galloway)