*C$ hits Sept. 2010 low before recovering
*Bond prices fall across curve
TORONTO, Sept 26 (Reuters) - The Canadian dollar recovered from its weakest level in more than a year against the U.S. dollar on Monday as risk sentiment turned around on signs the European Central Bank was being more proactive in tackling the euro zone debt crisis.
European policymakers began on working on new ways to stop fallout from Greece's near-bankruptcy from inflicting more damage on the world economy. [ID:nS1E78O01Z]
"Through the Asian session, markets have been selling risk and they've been buying them back through London, the Canadian dollar just being dragged on by that really," said Adam Cole, global head of FX strategy at RBC Capital Markets in London.
The move in the Canadian currency tracked a pickup in world stocks and the euro after ECB Governing Council member Ewald Nowotny was quoted as saying that the possibility of interest rate cuts should not be ruled out. [MKTS/GLOB]
Last week, traumatized investors pushed the Canadian dollar 5 percent lower against the safe-haven greenback.
At 8:14 a.m. (1414 GMT), the Canadian dollarstood at C$1.0286 to the U.S. dollar, or 97.22 U.S. cents, up slightly from Friday's North American session at C$1.0294 to the U.S. dollar, or 97.14 U.S. cents.
Earlier, the currency slipped as low as $1.0386, or 96.28 U.S. cents, its worst level since Sept. 9, 2010.
Cole noted there was significant support for the Canadian dollar around last September's trough near C$1.0670. Resistance is back toward parity where the currency has held for most of the year, though getting back there will be a struggle.
"It's difficult to see a catalyst ... there are still so many concerns over the banking system in Europe and the direction of euro zone policy and failure of the various parties involved to reach any kind of binding agreement."
Bond prices were lower across the curve. The two-year Canadian government bondwas down 8 Canadian cents to yield 1.033 percent, while the 10-year bond shed 27 Canadian cents to yield 2.104 percent. (Reporting by Claire Sibonney, Editing by Chizu Nomiyama)
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