CANADA FX DEBT-Canadian dollar at 3 mth low, bonds rally

Mon Mar 2, 2009 11:15am EST
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* C$ hit by lower crude, greenback strength

* Currency slides as low as 77.59 U.S. cents

* GDP data offers little help to C$

* Bonds bolstered by equity slump, flight to safety (Adds details)

By Ka Yan Ng

TORONTO, March 2 (Reuters) - The Canadian dollar briefly edged off a three-month low versus the U.S. dollar but quickly slipped back as the declining price of crude and renewed risk aversion overtook data that showed Canada's economy contracted less than expected in the fourth quarter.

The currency had fallen to its lowest level since early December, ahead of the GDP data, as financial woes prompted a flight to the safety of U.S. dollar assets as American International Group posted a big loss amid U.S. government aid for the insurer.

The currency firmed immediately after the domestic data, which showed the economy shrank at an annualized rate of 3.4 percent in the fourth quarter of last year, compared with a market forecast for a 3.6 percent contraction. [ID:nN02254034]

Markets had been bracing for the worst after Finance Minister Jim Flaherty hinted as much in remarks to the media before the Statistics Canada release.   Continued...