* Canada dollar dips vs U.S. dollar in thin trade
* Bond prices up across curve
* Concerns linger about weakening economy
By Lynne Olver
TORONTO, Dec 29 (Reuters) - The Canadian dollar was lower against the U.S. currency on Monday morning as lingering concerns about the economy outweighed higher stock and commodity prices.
Bonds were higher across the yield curve, in line with gains in the U.S. Treasury market, helped by safe-haven flows due to rising tensions in the Middle East.
At 9:41 a.m. (1431 GMT), the currency was at C$1.2196 to the U.S. dollar, or 81.99 U.S. cents. That was down from its closing level last Wednesday of C$1.2092 to the U.S. dollar, or 82.70 U.S. cents. Canadian financial markets were closed Thursday and Friday for the Christmas and Boxing Day holidays.
With many market players still away for the Christmas break, the currency shrugged off a couple of its traditional drivers, gold and oil prices. Crude rose as high as $42.20 a barrel in New York on Monday after Israel attacked the Hamas-ruled Gaza Strip, but later pared those gains to trade around $38.70.
Still, the Canadian currency could get a lift in the session, one market participant said.
"It is lagging because Canada is still seen as a country that has weakening economics and a dovish central bank," said Jack Spitz, managing director of foreign exchange at National Bank Financial in Toronto.
If Canadian stocks can hold their early gains and crude oil stabilizes around $40 a barrel, the Canadian currency should attract higher bids, Spitz said.
"I would suspect that the Canadian dollar will play some catch-up today."
With no major economic data in Canada or the United States to lend direction this week, Spitz said he expects the North American currency pair to gyrate within the recent range of C$1.1980 to C$1.2400, or 80.65 U.S. cents to 83.47 U.S. cents.
"I think those remain substantial pivots for the next leg up or down," Spitz said.
The year-end is in sight, and currency market participants can look to a variety of potentially market-moving events in January. On Jan. 20, the Bank of Canada will release its next interest rate decision; on Jan. 22, the central bank will follow with an update to its semi-annual Monetary Policy Report; and on Jan. 27, the federal government is expected to reveal a stimulus package in the Canadian budget.
BONDS UP ACROSS THE BOARD
Bond prices were up, following Treasury market gains last Friday and early on Monday morning.
The Canadian economy is believed to be in recession but the country's real estate and financial services companies have not deteriorated to the same degree as those in the United States, keeping bond yields higher than their U.S. counterparts.
The two-year bond was up 19 Canadian cents at C$103.11 to yield 1.107 percent. The 10-year bond climbed 75 Canadian cents to C$112.67 to yield 2.715 percent.
The yield spread between the two-year and 10-year bond was at 171 basis points, up from 161 basis points at the previous close.
The 30-year bond rose 90 Canadian cents to C$128.00 to yield 3.447 percent. In the United States, the 30-year Treasury yielded 2.588 percent. (Reporting by Lynne Olver; Editing by Tom Hals)