* C$ closes stronger at C$0.9854 vs US$ or $1.0148
* Equities rally, euro gains as risk sentiment improves
* Bonds prices slip across the curve
By Andrea Hopkins
TORONTO, Sept 13 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday as investors crept back to riskier investments, pushing global equities and the euro higher despite fears of a Greek default.
The U.S. dollar, boosted on Monday by a flight to safety as investors fled European stocks and the euro, eased back on hopes Europe's top powers will supply fresh support for Greece. Global stocks and the euro rallied even as investors remained worried European policymakers had no plan to stem the region's debt crisis. [MKTS/GLOB]
A Reuters report quoting a Greek government official saying that Greek, German and French leaders would hold a conference call on Wednesday helped buoy the euro and underpin optimism in European equity markets. Two German government sources confirmed the plans. [ID:nL5E7KD29C] [ID:nB4E7K9007]
Still, market confidence suffered another blow when Italy had to pay the highest yield since it joined the euro zone in 1999 to sell five-year bonds. [ID:L5E7KD1TR]
The Canadian dollar CAD=D4 ended the North American session at C$0.9854 to the U.S. dollar, or $1.0148 U.S. cents, up from Monday's session close at $0.9921 to the U.S. dollar, or C$1.0080. It had dipped as low as C$0.9977 to the U.S. dollar, or C$1.0023, in early trade.
On Monday the Canadian dollar broke below parity for the first time in over a month to touch its weakest level since January.
"I'm actually surprised by how much it has rallied today, just in the context that there is still a lot of uncertainty floating around in Europe, the Italian bond auction didn't go that well," said George Davis, chief technical strategist at Royal Bank of Canada.
"The one thing that sort of turned things around here is the fact that we've seen equity markets quite buoyant today and that seems to be the key relationship that people are focused on. When equities sell off, that is the risk-off trade, and that's negative for the Canadian dollar."
The Dow Jones industrial average .DJI gained 0.40 percent, the Standard & Poor's 500 Index .SPX gained 0.91 percent, and the Nasdaq Composite Index .IXIC gained 1.49 percent.
Toronto's main stock index .GSPTSE pushed 0.47 percent higher as investors picked up beaten down shares of banks and energy companies. [.TO]
Commodities were mixed. Brent crude prices slipped, dragged down by a downward revision to the International Energy Agency's forecast for growth in global oil consumption due to the struggling economy. [O/R]
Gold prices rose nearly 1 percent on the higher equity markets and euro rebound. [GOL/]
U.S. Treasury prices retreated as stocks gained and damped demand for safe-haven U.S. government debt. Canadian bond prices followed.
The two-year Canadian government bond CA2YT=RR was down 12 Canadian cents to yield 0.941 percent, while the 10-year bond CA10YT=RR lost 48 Canadian cents to yield 2.195 percent. (Additional reporting by Claire Sibonney; Editing by Jeffrey Hodgson)