* C$ closes at C$1.0365 to the U.S. dollar
* PM talk of C$ concerns weighs on currency
* Bond prices rally on soft economic data
(Recasts)
By Frank Pingue
TORONTO, Oct 13 (Reuters) - Canada's dollar hit a 14-month
high within striking distance of parity with a weakening U.S.
dollar on Tuesday, but as the session progressed it
relinquished some of the gains as the market's appetite for
risk waned.
The Canadian currency charged to C$1.0265 to the U.S.
dollar, or 97.42 U.S. cents, its loftiest level since August
2008, sparking talk that it could soon move above the greenback
for the first time since July 2008.
But the currency went on to slide as low as C$1.0375 to the
U.S. dollar, or 96.39 U.S. cents, in a North American session
where investors appeared to lose some interest in snapping up
risky assets such as the Canadian dollar.
It hit a session low after Canadian Prime Minister Stephen
Harper said too rapid a rise in the currency could damage the
country's economic recovery. [ID:nN13199717]
"Some of the move was profit-taking and some of it was the
comments that were attributed to Stephen Harper," said Jack
Spitz, managing director of foreign exchange at National Bank
Financial.
"Setting aside the price action today there seems seems to
be a relatively widespread belief that the U.S. dollar is going
to continue to weaken and that will contribute to a move to
parity in dollar/Canada."
The early strength in the currency that led it to the
14-month high was attributed to lofty commodity prices and
recent upbeat Canadian economic data that ignited talk about
whether the Bank of Canada will raise interest rates sooner
than expected.
That sentiment all but vanished as the session wore on.
The Canadian dollar went on to close the session at
C$1.0365 to the U.S. dollar, or 96.48 U.S. cents, up from
C$1.0444 to the U.S. dollar, or 95.75 U.S. cents, at Friday's
close.
The Bank of Canada did not offer an official closing value
for the currency on Monday as it was the Thanksgiving Day
holiday in Canada.
The latest data out of Canada showed new house prices rose
for the second straight month in August, up 0.1 percent, but
below expectations for a 0.2 percent climb. [ID:nN13150887]
BONDS PRICES RALLY
Canadian bond prices snapped a two-session skid to end
higher across the curve, tracking a move in the bigger U.S.
Treasury market as overseas data curbed expectations for a
strong global economic recovery.
The latest data to spark demand for more secure government
debt was a measure of German investor morale that unexpectedly
fell in October, suggesting that Europe's largest economy will
recover only gradually. [ID:nLD628386]
That report followed recent U.S. unemployment data that
revealed bigger-than-forecast job losses.
The two-year bond CA2YT=RR rose 11 Canadian cents to
C$99.16 to yield 1.653 percent, while the 30-year bond
CA10YT=RR rose 45 Canadian cents to C$117.65 to yield 3.945
percent.
The Canadian market mostly underperformed U.S. Treasury
bonds, with the 30-year Canadian yield about 23 basis points
below its U.S. counterpart, compared with around 26.7 basis
points on Friday.
(Editing by Peter Galloway)
