* C$ at C$1.0407 vs US$, or 96.09 U.S. cents
* C$ trading cautious ahead of BoC rate decision
* Bond prices mixed
By Jon Cook
TORONTO, June 5 (Reuters) - The Canadian dollar was slightly weaker on Tuesday on growing concerns about whether Spain can restore health to its banks and as investors remained cautious ahead of the Bank of Canada's rate announcement.
Spain's problems, and the threat they hold for the rest of the world, will be discussed in a teleconference by finance ministers and central bankers from the United States, Canada, Japan, Britain, Germany, France and Italy (the G7) later on Tuesday.
"The Spanish bond auctions and the bank issues there are certainly wreaking havoc on markets," said Blake Jespersen, managing director, foreign exchange sales, BMO Capital Markets.
The G7 talks had boosted the euro earlier but it fell after Spain's Treasury Minister Cristobal Montoro highlighted the funding problems facing Spain as investors fretted the country may have to seek external aid.
The Canadian dollar, which is sensitive to global growth issues, firmed overnight to C$1.0361 versus the U.S. currency, or 96.51 U.S. cents.
However, trading of the currency remained cautious ahead of the Bank of Canada's interest rate announcement at 9 a.m. (1300 GMT) on Tuesday.
Canada's central bank is widely expected to keep interest rates on hold given fears about the euro zone's debt woes and signs of weaker global growth. But traders were trying to gauge how much the central bank will tone down the hawkish language it used in April.
"The market's expecting the tone to be somewhat more dovish," said Jespersen. "There's a lot of speculation around (Bank of Canada Governor Mark) Carney's announcement this morning so the tone could change dramatically after today."
At 7:57 a.m. (1157 GMT), the Canadian currency was at C$1.0407 against the U.S. dollar, or 96.09 U.S. cents, down slightly from Monday's close at C$1.0397, versus the greenback, or 96.18 U.S. cents.
Jespersen said there remained the chance that Carney's tone stays hawkish, which would boost the Canadian dollar.
"There is a chance this backs up to C$1.0350 if Carney does in fact continue his rhetoric that the domestic economy warrants a rate hike not a cut."
Canadian bond markets were mixed. Canada's four-year bond rose 3 Canadian cents to yield 1.086 percent, while the benchmark 10-year bond fell 4 cents to yield 1.681 percent. ($1=$1.04 Canadian) (Editing by Dave Zimmerman)