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* C$ ends lower at C$0.9901 to the U.S. dollar, or $1.01
* Bond prices tip higher as risk sentiment fades (Updates to close)
By Ka Yan Ng
TORONTO, Aug 22 (Reuters) - Canada's dollar finished slightly lower against the U.S. currency on Monday, unwinding early gains as a rebound on stock markets that had pumped it up lost strength.
Bond prices were flat to higher, erasing losses, as the momentum toward risk assets ebbed.
Movements in the equity markets were the currency's main driver due to a lack of economic data or developments in the euro zone debt crisis. Toronto's main stock index, which had gained more than 1 percent early in the session, cut gains and closed only moderately higher. [.TO]
"The market is searching for some direction right now," said Shane Enright, executive director, foreign exchange sales, at CIBC World Markets, noting currency flows were fairly light to start the week.
The Canadian dollar CAD=D4 closed at C$0.9901 to the U.S. dollar, or $1.01, down from Friday's North American finish at C$0.9886 to the U.S. dollar, or $1.0115. The day's range was C$0.9829-C$0.9920.
The two-year bond CA2YT=RR was flat to yield 0.877 percent, while the 10-year bond CA10YT=RR edged up 8 Canadian cents to yield 2.296 percent.
Investors were in no mood to jump aggressively into the market due to lingering worries that the euro zone debt crisis might spread to bigger economies. [MKTS/GLOB]
An annual bankers gathering in Jackson Hole, Wyoming, late this week is the key event of the week. Investors are waiting to see whether the U.S. Federal Reserve flags further economic stimulus, a year after Chairman Ben Bernanke launched a second round of quantitative easing to revive the economy.
"The market seems to be trying to figure out exactly what it wants to do next," said John Curran, senior vice president at CanadianForex.
"This week is going to be about people figuring out what's going to happen at Jackson Hole. So we may see rather subdued ranges but probably volatile trading within those ranges."
Jean Boivin, deputy governor at the Bank of Canada, and Senior Deputy Governor Tiff Macklem, both have speeches this week ahead of the Jackson Hole event.
Analysts were not expecting their remarks to differ much from last week's testimony to a parliamentary committee by Bank of Canada Governor Mark Carney.
Carney and Finance Minister Jim Flaherty both highlighted the risks posed by Europe's stubborn debt crisis and the slow U.S. recovery from recession, but neither forecast a new recession. [ID:nN1E77I0L1]
"The markets had a chance to hear from them recently. Any domestic speeches will be watched closely but right now I think we're going to get our direction from broader asset markets for the most part," Enright said.
"There's more macro risk here to be honest." (Reporting by Ka Yan Ng; editing by Peter Galloway)