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* Canadian dollar falls to 93.99 U.S. cents
* Bank of Canada hold rates steady, repeats rate promise
* Short-term bonds gain in flight to safety (Updates to close)
By Ka Yan Ng
TORONTO, Dec 8 (Reuters) - The Canadian dollar fell against a broadly stronger U.S. currency on Tuesday, pricked by the Bank of Canada's little changed view on the economy, but wounded by global credit concerns.
Appetite for risk began to wane in overnight markets after credit agency Fitch cut Greece's credit rating and as concerns about Dubai's debt woes resurfaced, keeping the U.S. dollar buoyant as a safe haven. [ID:nGEE5B71A1] [ID:nWNA9534] [FRX/]
The Bank of Canada reiteration on Tuesday that it would leave its benchmark interest rate unchanged until mid 2010, produced only a ripple in the Canadian dollar's wave of decline.
"We're in an environment of risk aversion," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"The Bank of Canada, from a market perspective, turned out to be a nonevent. The minor changes (in its statement) were very much expected," he said.
The Canadian dollar finished at C$1.0639 to the U.S. dollar, or 93.99 U.S. cents, down from Monday's finish at C$1.0529 to the U.S. dollar, or 94.98 U.S. cents.
It dropped to C$1.0600 to the U.S. dollar, or 94.34 U.S. cents, just after the central bank made its announcement from about C$1.0572, or 94.59 U.S. cents, just before the statement. The currency later fell as low as 93.70 U.S. cents, its lowest point in more than a week.
Analysts attributed the decline after the interest rate announcement to disappointment that recent strong economic data did not prod the Bank of Canada into taking a more hawkish view on rates.
Data on Friday showed Canada's economy added five times more jobs than expected in November. [ID:nN04141170]
The Bank of Canada dampened any expectations of an early rate hike even though it said it sees economic recovery gathering momentum in coming quarters. [ID:nN08193566]
"Some people maybe were thinking with the strong employment data we saw on Friday (the Bank of Canada) would sound more hawkish," said Camilla Sutton, currency strategist at Scotia Capital.
Lower commodity prices also undermined the currency. The price of oil, a key Canadian export, fell below $73 a barrel on Tuesday, extending losses from the previous day, while gold was also under pressure. [O/R] [GOL]
SHORT TERM BONDS GAIN
Short Canadian bond prices rose as money flowed out of equities and as Canadian interest rates looked to stay low for some time.
Toronto's main stock index slid to its lowest level in more than a week, while U.S. stock indexes fell on concerns about the outlook for a global recovery, putting the shine back on safer instruments such as government debt.
The two-year Canadian government bond CA2YT=RR rose 4 Canadian cents to C$100.09 to yield 1.206 percent. The 10-year bond CA10YT=RR fell 20 Canadian cents to C$103.60 to yield 3.304 percent. (Additional reporting by Jennifer Kwan; editing by Peter Galloway)