CANADA FX DEBT-C$ weakens to parity, bank downgrade risk weighs

* C$ at C$0.9996 to US$, or $1.0004, after hitting parity
    * Moody's eyes Canadian bank downgrades
    * Hurricane Sandy likely to limit FX volume

    By Alastair Sharp
    TORONTO, Oct 29 (Reuters) - The Canadian dollar weakened to
parity with its U.S. counterpart on Monday for the first time
since August, as downbeat corporate earnings hurt the global
growth outlook and a massive storm threatened the U.S. East
    The currency also took a hit after Moody's said on Friday it
was reviewing five top Canadian banks for possible rating
downgrades due to concerns about a softening economy and
volatile capital markets. 
    The move was supported by broader strength in the U.S.
dollar, and was expected to continue beyond the psychological
    "We should see some decent buying interest above parity, but
this is just on the back of a more general (U.S.) dollar move,"
said Elsa Lignos, a London-based currency strategist at Royal
Bank of Canada.
    At 8:20 a.m. (1220 GMT) the Canadian dollar was
trading at C$0.9996 to the greenback, or $1.0004, compared with
C$0.9980, or $1.0020, at Friday's North American close. Earlier
Monday, the Canadian dollar traded at equal value with the U.S.
    Hurricane Sandy forced New York and other cities to close
their public transport systems and schools and order mass
evacuations. All U.S. stock markets were closed on Monday and
may also be shut on Tuesday. 
    Volumes in the foreign exchange market were also expected to
be light.
    Canadian government debt outperformed its U.S. equivalent in
all but the 30-year tenure, with the two-year bond up
4 Canadian cents to yield 1.101 percent, and the benchmark
10-year bond adding 28 Canadian cents to yield 1.808