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* Canadian dollar now down 21.7 percent in 2008
* Market awaits clues of possible Bank of Canada rate cut
By Frank Pingue
TORONTO, Oct 23 (Reuters) - The Canadian dollar skidded to a 4-year lower versus the U.S. dollar on Thursday as investors liquidated riskier assets in favor of the greenback, leaving the domestic currency pinned below 80 U.S. cents.
Domestic bond prices were mostly higher across the curve, relishing in their role as a safe-haven investment as fears of a global recession persist.
At 9:35 a.m. (1335 GMT), the Canadian unit was at C$1.2670 to the U.S. dollar, or 78.93 U.S. cents, down from C$1.2547 to the U.S. dollar, or 79.70 U.S. cents, at Wednesday's close.
Earlier, the Canadian currency fell to C$1.2740 to the U.S. dollar, or 78.49 U.S. cents, which was its weakest since October 2004, but the move was blamed on investors being forced to liquidate assets rather than the usual fundamentals.
"Were just seeing seeing a wave of liquidations by funds and that means they are basically selling anything they can sell, anything that isn't bolted down, and that includes relatively solid currencies like the Canadian dollar," said Doug Porter, deputy chief economist at BMO Capital Markets.
"Personally I think it's way overdone and we are going to see at some point, it may take awhile, but we are going to see a snap-back. But I don't think anybody wants to stand in the way of this move."
On the heels of its 17.5 percent surge last year, when it rose above the U.S. dollar for the first time in more than 30 years, the Canadian dollar is now down 21.7 percent this year.
Traders will keep an eye on the Bank of Canada's Monetary Policy Report due out at 10:30 a.m., but the blunt tone of its statement from earlier this week leaves the chances of any surprises very small.
The central bank cut its key rate by 25 basis points on Tuesday and in the statement that accompanied the decision it slashed its projections for economic growth and inflation, and suggested that more rate cuts are on the horizon.
Canadian bond prices were flat to higher and expected to all move comfortably higher throughout the session as the threat of a recession for the global economy has shown no signs of easing.
Recent Canadian data have been worse than expected and seem to support the idea of the Bank of Canada cutting rates more. Meanwhile, the latest data from the United States showed the number of U.S. workers filing new claims for jobless benefits rose by more than expected.
"Loaded on top of everything we are faced the prospect of not just a U.S. recession but more than likely a global recession," said Porter. "And that's knocking any lingering inflation concerns whatsoever and bonds are really the last refuge in this kind of environment."
The Canadian overnight Libor rate LIBOR01 was 2.2500 percent, down from 2.3250 percent on Wednesday, a further sign that global efforts to bolter confidence in credit markets is having the desired effect.
Wednesday's CORRA rate CORRA= was 2.2526 percent, up from 2.452 percent on Tuesday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond was down 2 Canadian cents at C$101.32 to yield 2.105 percent. The 10-year bond was up 18 Canadian cents at C$105.45 to yield 3.573 percent.
The yield spread between the two-year and the 10-year bond moved to 161 basis points from 154 basis points at the previous close.
The 30-year bond rose 30 Canadian cents to C$115.45 to yield 4.079 percent. In the United States, the 30-year Treasury yielded 4.020 percent. (Editing by Frank McGurty)