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* Touches five-week low of C$1.0692, or 93.53 U.S. cents
* China move to tighten bank lending rattles markets
* Bond prices firm as investors flee risk
By Jennifer Kwan
TORONTO, Jan 26 (Reuters) - The Canadian dollar's fall against the U.S. currency steepened on Tuesday as investors shunned risky assets, unnerved by China's clampdown on lending and as Japan's credit rating was put in the spotlight.
Beijing ordered some banks to comply immediately with a planned increase in reserves, rattling global markets and sending emerging market stocks down more than 2 percent. [MKTS/GLOB]
Standard & Poor's added to the sour mood by warning it would cut Japan's credit rating unless it produced a credible plan to rein in its soaring debt. [ID:nSGE60P08I]
"Put together they can have a destabilizing impact on risk assets for the simple reason that China's position as a global leader is unparalleled in some way. If we see a slowdown in their growth performance it will definitely impact the pace of global economic growth," said Millan Mulraine, economics strategist at TD Securities.
The Canadian dollar touched a low C$1.0692 to the U.S. dollar, or 93.53 U.S. cents, its lowest level since Dec. 21.
By 9:34 a.m. (1434 GMT), it was at C$1.0690 to the U.S. dollar, or 93.55 U.S. cents, down from its Monday close at C$1.0581 to the U.S. dollar, or 94.51 U.S. cents.
Also weighing on the currency was a weak price for oil, which dropped toward $74 a barrel in part on the China news, while gold prices were also softer. [O/R] [GOL/]
Market watchers said investors would remain wary this week ahead of key events, including news on whether U.S. Federal Reserve Chairman Ben Bernanke would win a U.S. Senate vote for a second term, as well as a rate announcement by the central bank.
The market was looking for further market guidance from U.S. President Barack Obama's State of the Union address on Wednesday.
Government bond prices were firmer across the board, as demand climbed on concern China's clampdown on bank lending could slow the pace of global recovery. [US/]
"We have a flight from risk assets to the safety of government bonds," said Mulraine. (Editing by Jeffrey Hodgson)