* C$ falls to to 94.30 U.S. cents
* Bonds edge higher as U.S. stocks ease
* Canada producer prices up, current account deficit rises (Updates to close, adds details, quotes)
By Claire Sibonney
TORONTO, Aug 30 (Reuters) - The Canadian dollar sagged against the greenback on Monday, taking its cue from soft domestic economic data and worries about the U.S. recovery and global growth.
The Canadian dollar, and other riskier currencies such the euro and sterling, also came under pressure as yen rose broadly after the Bank of Japan's decision to expand cheap loans to banks disappointed investors who had looked for more aggressive measures to curb the yen's strength.
"It was kind of a risk-off sort of feel," said Shaun Osborne, chief currency strategist at TD Securities.
"The Bank of Japan decision was really quite disappointing relative to what the markets expected or hoped the Bank of Japan would do. It was a relatively benign easing."
As well, data on Monday showed Canada's July producer price index edged up just 0.1 percent in July, compared with expectations of 0.4 percent. [ID:nSCLUJE64Z] Meanwhile, the current account deficit rose more than expected in the second quarter. [ID:nN30171389]
"That's a weaker fundamental backdrop ... it would maybe suggest Canada doing a little less well ahead of the Bank of Canada next week," said Sacha Tihanyi, a currency strategist at Scotia Capital, referring to the central bank's next interest rate announcement on Sept. 8.
Elsewhere, U.S. stocks fell as a statement from President Barack Obama fell short of addressing worries the recovery is faltering, while U.S. crude oil figures settled lower after three straight sessions of gains. [.N] [O/R]
The Canadian currency ended the North American session at C$1.0605 to the U.S. dollar, or 94.30 U.S. cents, down from C$1.0524 to the U.S. dollar, or 95.02 U.S. cents, at Friday's close.
Tuesday's release of Canada's second-quarter gross domestic product data may help seal expectations of whether the Bank of Canada will raise interest rates next month.
After bolting out of the gate in the first quarter with growth of 6.1 percent, the April to June measure of economic expansion in Canada is likely to be decidedly slower, at less than half that pace. [ID:nN2750745]
Economists surveyed by Reuters forecast, on average, 2.5 percent annualized growth in second-quarter GDP.
Osborne said if the data disappoints, it may spark further weakness in the currency, however he does not expect it to break beyond the recent range of around C$1.04 to C$1.0660 to the U.S. dollar.
"I think it would have to be exceptionally weak tomorrow to drive the Canadian dollar much beyond C$1.0650-60."
But for the next 24 to 48 hours, Osborne said the currency is not seen weakening further than C$1.0665 or strengthening beyond C$1.0425.
Tugging in both directions for the currency, Canada's primary securities dealers forecast the central bank will raise its key rate by a quarter-point to 1.0 percent on Sept. 8, but market pricing is less certain.
Markets on Monday, as measured by a Reuters calculation of yields on overnight index swaps, are leaning towards the bank keeping the rate unchanged. BOCWATCH
Osborne noted the lack of direction on Monday was partly due to a UK holiday robbing the markets of a bit more volume, and he expected activity to pick up next week after the Labor Day long weekend in Canada and the United States draws summer to an unofficial end.
Friday's U.S. payrolls report may also sway rate expectations, given the Bank of Canada has suggested further interest rate hikes would be weighed against domestic and global economic developments.
The mixed sentiment on interest rate expectations and a slower world growth profile have kept government bond prices supported in recent weeks.
Canadian government bonds tracked U.S. Treasuries higher on Monday as U.S. equities drifted lower and traders clawed back some of the sharp losses on Friday, when U.S. Federal Reserve Chairman Ben Bernanke signaled the U.S. central bank was not on the verge of a new round of bond buying. [US/]
The two-year bond CA2YT=RR gained 12 Canadian cents to yield 1.251 percent, while the 10-year bond CA10YT=RR jumped 77 Canadian cents to yield 2.786 percent. (Additional reporting by Ka Yan Ng; editing by Rob Wilson)