CANADA FX DEBT-C$ weakens as stocks slip, Aussie outlook darkens

* C$ weakens to close at C$0.9843, or $1.0160
    * Australia rate cut spurs caution, but leads to gains vs A$
    * Spain PM says bailout not imminent, limits risk appetite
    * Traders await employment data, central bank decisions

    By Alastair Sharp
    TORONTO, Oct 2 (Reuters) - The Canadian dollar closed lower
against the U.S. currency on Tuesday after Spain's prime
minister said a request for a debt bailout for his country is
not imminent and as investors expressed fear about third-quarter
    The more cautious tone that weighed on the Canadian currency
was deepened by an earlier-than-anticipated interest rate cut by
the Reserve Bank of Australia (RBA), which the bank justified in
part by pointing to a darker global economic background.
    "One of the things that is causing the Canadian dollar to
weaken is a little bit of weakness in equity markets, but also
the RBA surprised by cutting rates, which adds an element of
uncertainty over the economic outlook," said HSBC chief
economist David Watt in Toronto. 
    Canadian and U.S. stocks were mixed as investors retreated
from stocks closely tied to the pace of growth and digested the
statement by Spain's prime minister that a request for European
aid was not imminent.   
    A request for a bailout is viewed as positive for financial 
markets because it would trigger Spanish bond buying by the 
European Central Bank, which would lower the country's borrowing
     Traders were also looking ahead to key North American
employment data due on Friday.    
    "There's a lot of stuff ahead and not much today, so people
will probably sit on their hands for now," said Benjamin
Reitzes, senior economist and foreign exchange strategist at BMO
Capital Markets.
    The Canadian dollar closed at C$0.9843, or $1.0160,
weaker than its close of C$0.9827, or $1.0176, on Monday.
    Reitzes said the Canadian dollar would find support around
C$0.9874 and the Sept. 5 session low of C$0.9920. He saw
resistance at last week's high of C$0.9781.
    The Canadian dollar firmed against Australia's currency
after the central bank of the fellow resource-rich economy cut
interest rates to a three-year low and left the door ajar for
more easing. 
    It climbed as high as C$1.0083 to the Australian dollar, or
99.17 Australian cents, its strongest level since Sept. 11.
    Both Canada and the United States release September
employment figures on Friday, while the European and Japanese
central banks both make interest rate decisions this week. 
    On Wednesday, payrolls processor ADP issues its U.S. jobs
data, and the Institute for Supply Management publishes data
about non-manufacturing sectors of the U.S. economy.     
    The European Central Bank will decide on Thursday whether to
hold rates or cut them to offer further support for stumbling
euro zone countries. 
    The Bank of Japan is expected to keep monetary settings
unchanged on Friday even as weakening Asian manufacturing
activity clouds the outlook. The bank is seen preferring to
spend some time reviewing the effects of its policy loosening
last month. 
    Canadian government bond prices were mixed, with the
two-year bond little changed to yield 1.061 percent,
while the benchmark 10-year bond slipped 7 Canadian
cents, yielding 1.722 percent.