* C$ climbs to C$0.9790 vs US$, or $1.0215
* C$ touches two-week high against greenback
* Bond prices mixed
By Andrea Hopkins
TORONTO, Sept 16 (Reuters) - The Canadian dollar strengthened to touch its highest point against the greenback in two weeks on Friday, as investor appetite for risk stretched into a fourth day, helped by less pessimism over Europe.
Global equities rose but the euro slid as hope Europe was finally getting a grip on the region's debt crisis was offset by lingering fears that Greece is still at risk of default.
Gains in global equity markets suggested risk aversion has dissipated, but a sharp decline in French and Italian banking stocks, along with the euro's slide, indicated caution lingers despite encouraging efforts to resolve the debt crisis. [MKTS/GLOB]
"We're capping off a decent week of risk appetite. Dollar-Canada had been quietly rangebound despite the positive risk backdrop and I think we just saw a little late-week, late-afternoon follow through and strength in the Canadian dollar that was long overdue," said Matt Perrier, director of foreign exchange sales at BMO Capital Markets.
The Canadian dollar CAD=D4 ended the North American session at C$0.9790 to the U.S. dollar, or $1.0215 U.S. cents, up from Thursday's North American finish at C$0.9840 to the U.S. dollar, or $1.0163 U.S. cents.
The stronger close capped a week in which the Canadian currency weakened below parity against the U.S. dollar for the first time since Aug. 9 as fears over Europe's debt crisis shook markets, sending investors to the relative safety and liquidity of the U.S. dollar.
The stronger weekly close could bode well for more gains early next week, Perrier said.
"(We have) made a higher high and lower low and closed below the previous week's low. On a purely technical basis that would suggest we could see Canada strengthen further into the start of next week and this risk rally that we've seen over the last four days in equities continue," he said.
"Having said that, we've been trading from headline to headline, and it is not inconceivable that one headline could push us back into risk aversion mode."
The crisis in Europe has driven market sentiment in the last week, overshadowing any economic data.
A U.S. report showed consumer sentiment rose in early September, but Americans remained very gloomy about the future with their expectations for the economy falling to the lowest level since 1980. [ID:nS1E78F0HJ]
In Canada, a report showed foreigners bought a record amount of Canadian treasury bills in July as the U.S. debt ceiling negotiations and European sovereign debt crisis shook investor confidence. [ID:nS1E78F04I]
Analysts said this showed Canadian assets can benefit from safe-haven flows in uncertain markets, a factor which should help support the Canadian dollar over time.
Next week, Canadian inflation data to be released on Wednesday is expected to show a moderation in consumer prices in August, confirming a lack of inflationary pressure. [ID:nS1E78F12T]
Canadian bond prices were mixed.
The two-year bond CA2YT=RR was off 8 Canadian cents to yield 1.064 percent, while the 10-year bond CA10YT=RR was up 3 Canadian cents to yield 2.292 percent. (Additional reporting by Claire Sibonney; Editing by Jeffrey Hodgson)