* C$ ends at C$0.9840 vs US$, or $1.0163
* U.S. dollar seen gaining momentum as Europe weighs
* Bond prices slip across the curve
By Andrea Hopkins
TORONTO, Sept 15 (Reuters) - The Canadian dollar ended stronger against the U.S. dollar on Thursday as investors returned to equities, oil and other risk assets, encouraged by signs policymakers are addressing the European debt crisis.
Global stocks advanced for a third straight day and the euro gained sharply after the world's leading central banks moved to make funding easier for European banks facing difficulties raising U.S. dollars. [MKTS/GLOB]
In another step to alleviate Europe's debt crisis, U.S. Treasury Secretary Timothy Geithner will discuss with European finance ministers the possibility of leveraging the euro zone's bailout fund to make it more effective, sources said. [ID:nL5E7KF1CX].
The moves sent European shares more than 2 percent higher. North American stocks followed suit, with stock indexes on Wall Street and in Toronto closing up more than 1 percent.
Canada's currency, which typically follows the direction of U.S. equities, strengthened against the U.S. dollar as investors returned to riskier assets, but analysts said the move could be short-lived.
"Markets are adding a little bit of risk," said John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm.
"But it still amazes me that people think that the European situation is a short-term thing and might be fixed. Realistically, I think the U.S. dollar is gaining momentum going into risk-aversion mode, where people should be leery about what's going on globally."
The Canadian dollar CAD=D4 ended the North American session at C$0.9840 to the U.S. dollar, or $1.0163 U.S. cents, up from Wednesday's North American session close of C$0.9908 to the U.S. dollar, or $1.0093 U.S. cents.
In a sign of difficulties ahead, German Chancellor Angela Merkel bluntly rejected euro zone bonds as a solution to Europe's sovereign debt crisis. [ID:nL5E7KF1CX]
The news from Europe drowned out a fresh spate of disappointing U.S. data that showed new claims for jobless benefits rose unexpectedly last week and factory activity in the mid-Atlantic region contracted early this month. The data backed the view that the U.S. Federal Reserve would move soon to boost economic growth. [ID:nS1E78E0U8]
Separate data showed Canadian factory sales rose twice as much as expected in July, making a recession look less likely as the economy shows signs of picking up in the third quarter after an unexpected slump in the second. [ID:nS1E78E05E]
Canadian bond prices slipped across the curve.
The two-year bond CA2YT=RR was down 17.1 Canadian cents to yield 1.022 percent, while the 10-year bond CA10YT=RR lost 86 Canadian cents to yield 2.296 percent. (Additional reporting by Claire Sibonney; editing by Peter Galloway)