Loonie slips but off overnight low, bonds up

By Ka Yan Ng

TORONTO (Reuters) - Canada's currency was slightly weaker but off overnight lows against the U.S. currency on Tuesday, hurt by less risk appetite arising from concerns about the European banking sector.

The Canadian dollar was among several in a basket of currencies to be hit by risk aversion, which put the U.S. dollar on a course higher.

The EU Commission quoted results of stress tests in the banking sector, published in early October, which said losses could amount to 400 billion euros in 2009-10.

Poor results from UBS UBSN.VS and a shake-up of UK banks Lloyds (LLOY.L: Quote) and Royal Bank of Scotland (RBS.L: Quote) also prompted investors to cut back on risk.

"The news is not bullish on equities, and by extension, not bullish on currencies like Canada," said Jack Spitz, managing director of foreign exchange at National Bank Financial.

At 8:35 a.m., the Canadian dollar was at C$1.0799 to the U.S. dollar, or 92.60 U.S. cents, strengthening from an overnight low at C$1.0855 to the U.S. dollar, or 92.12 U.S. cents.

Still, it is down slightly from C$1.0778 to the U.S. dollar, or 92.78 U.S. cents, at Monday's close.

The Canadian data calendar is light until the employment figures for October are released on Friday, leaving the currency vulnerable to outside influences.