CANADA FX DEBT-C$ down for 2nd day on weak euro zone data
* C$ drifts lower to C$0.9627 vs US$ or $1.0387
* Canadian bonds underperform U.S. Treasuries
By Claire Sibonney
TORONTO, July 5 (Reuters) - The Canadian dollar slipped for a second session against the U.S. dollar on Tuesday morning as soft euro zone data and worries about further monetary tightening in China spoiled investor appetite for riskier assets.
Growth in the euro zone's dominant services sector slowed to its weakest pace since October, while euro zone retail sales data was also below expectations. [nL6E7I408N]
"It's a bit of a risk-off day, I think people are responding to some of the weaker purchasing managers indexes in Europe," said David Tulk, chief Canada macro strategist at TD Securities.
"The two currencies that are doing relatively well on the crosses are Swiss franc, just given the flight to quality, as well as the British pound because they had a decent PMI number."
Media reports about a possible rate rise in China and a Moody's report saying the scale of problem loans at local governments there may be much bigger than previously thought dented risk appetite, which had returned to the markets last week after Greece approved austerity measures. [nL3E7I507Y]
On Monday however, fears over euro zone debt returned after Standard & Poor's warned it would treat a rollover of privately held Greek debt now being discussed as a "selective default."
At 8:24 a.m. (1224 GMT), the currency CAD=D4 stood at C$0.9627 to the U.S. dollar, or $1.0387, down from Monday's North American session close at C$0.9608 versus the U.S. dollar, or $1.0408. The day's range was a narrow C$0.9590-C$0.9651, close to near-term resistance and support for the domestic currency.
"It's pretty benign ... More of a consolidation after the rally in the Canadian dollar over the last week or so and just waiting for (U.S.) payrolls and (Canadian) employment on Friday to kind of set the tone one way or the other," added Tulk.
"For the most part you're looking for a breakout and I think right now you're still in this range for the time being and we're still subjected to headline risk unfortunately."
Later in the morning, traders will be watching U.S. durable goods and factory orders data.
Canadian bond prices were little changed across the curve, underperforming their U.S. counterparts as Treasuries rebounded [US/].
Tulk noted that given the fact that Canadian bond prices rallied on Monday -- when U.S. markets were closed for the Independence Day holiday -- they didn't need to follow the move lower in yield.
The two-year bond CA2YT=RR was flat to yield 1.581 percent, while the 10-year bond CA10YT=RR was up 3 Canadian cents to yield 3.085 percent.
(Reporting by Claire Sibonney, Editing by Chizu Nomiyama)
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