* C$ at C$0.9961 vs US$ or $1.0039 * Currency reached C$0.9875 shortly after Obama victory * Status quo results spark jitters over U.S. fiscal cliff * German manufacturing data, ECB comments weigh on sentiment By Solarina Ho TORONTO, Nov 7 (Reuters) - The Canadian dollar weakened toward parity with the greenback on Wednesday as gains made overnight following U.S. President Barack Obama's re-election gave way to concerns about brewing fiscal problems in the United States and Europe. Obama defeated Republican challenger Mitt Romney on Tuesday, while Obama's fellow Democrats retained control of the Senate and Republicans kept their majority in the House of Representatives. The results signaled no dramatic shift in U.S. economic policies. But investors, worried about the looming U.S. "fiscal cliff," sought safety in assets considered less risky than the Canadian dollar. The fiscal cliff refers to a $600 billion package of tax increases and spending cuts is scheduled to take effect automatically beginning at the end of 2012, which many fear would drive the U.S. economy back into recession, unless the White House and Congress reach a deal to avert the budget actions. The prospect of a possible recession drove stock markets down sharply on Wednesday. "The steep slide in equity prices tells the story for risk assets in general and that includes the Canadian dollar. So the weakness in the (Canadian dollar) is pretty much following on that trend," said Greg Moore, FX strategist at TD Securities. "We're basically in the same place we were before the election. The division is still there. Basically the market sense would be that negotiations might be just as difficult as they were before the election." The Canadian dollar ended the North American session at C$0.9961 to the U.S. dollar, or $1.0039, weaker than Tuesday's finish at C$0.9918, or $1.0083. It also underperformed against most other major currencies. Overnight, the currency strengthened briefly to a near three-week high of C$0.9875, or $1.0127, a move shared by its commodity-linked counterparts. It touched its strongest level against the euro in nearly a month and had its best showing against the pound in about two weeks. EURO CRISIS WEIGHS ON GERMANY Also on Wednesday, data signaled that manufacturing in Germany, Europe's largest economy, is running out of steam three years into the euro zone debt crisis. That data was a catalyst for the initial risk-asset sell-off, Moore said, but as the North American session opened, focus turned to fears the fiscal cliff could crush U.S. economic recovery. Separately, European Central Bank President Mario Draghi said the bank expects the euro zone economy to remain weak "in the near term." The ECB is expected to maintain its monetary policy when the group meets this week. "The comments from the ECB ... weighed on sentiment a little bit. So you saw Canada weaken off on that news, and I think U.S. dollar gained some of that safe-haven flow on the risk-off reaction to it," said Don Mikolich, executive director, foreign exchange sales at CIBC World Markets. A huge rally in Greece involving nearly 100,000 protesters that turned violent underscored the ongoing unrest over the euro-zone crisis. The demonstration was held as Greek lawmakers neared a vote on an unpopular austerity package to win aid from lenders. Mikolich expected the trading range for the Canadian dollar to hold to C$0.9850 to U.S. dollar parity in the near term. The price of Canadian government debt rose across the curve. The two-year government of Canada bond was up 8 Canadian cents to yield 1.077 percent, while the benchmark 10-year bond was up 60 Canadian cents to yield 1.741 percent.