CANADA FX DEBT-C$ slides on post U.S. election fiscal worries

* C$ at C$0.9971 vs US$ or $1.0029
    * Had reached C$0.9875 shortly after Obama victory
    * Status quo results spark jitters over U.S. fiscal cliff
    * German manufacturing data, ECB comments weigh on sentiment

    By Solarina Ho
    TORONTO, Nov 7 (Reuters) - The Canadian dollar weakened
toward parity with the greenback on Wednesday as gains made
overnight following U.S. President Barack Obama's re-election
gave way to concerns about brewing fiscal problems in the United
States and Europe.
    Obama defeated Republican challenger Mitt Romney on Tuesday
after a grueling presidential race, while Obama's fellow
Democrats retained control of the Senate and Republicans kept
their majority in the House of Representatives. 
    The results signaled no dramatic shift in U.S. economic
policies. But investors, worried about the looming U.S. "fiscal
cliff", sought safety in assets considered less risky than the
Canadian dollar.
    In the "fiscal cliff" scenario, a $600 billion package of
tax increases and spending cuts is scheduled to take effect
automatically at the end of 2012, likely driving the economy
into recession, unless the White House and Congress reach a deal
to avert it. 
    The prospect of the United States failing to draw back from
returning to recession drove stock markets down sharply on
    "The steep slide in equity prices tells the story for risk
assets in general and that includes the Canadian dollar. So the
weakness in the (Canadian dollar) is pretty much following on
that trend," said Greg Moore, FX strategist at TD Securities.
    "We're basically in the same place we were before the
election. The division is still there. Basically the market
sense would be that negotiations might be just as difficult as
they were before the election."
    Around noon, the Canadian dollar slipped to
C$0.9971 to the U.S. dollar, or $1.0029, weaker than its North
American finish on Tuesday at C$0.9918, or $1.0083. It was also
underperforming against most other major currencies.
    Overnight, the currency strengthened briefly to a near
three-week high of C$0.9875, or $1.0127, a move shared by its
commodity-linked counterparts. It touched its strongest level
against the euro in nearly a month and had its best
showing against the pound in about two weeks.
    Data on Wednesday signaled that manufacturing in Germany,
Europe's largest economy, is running out of steam three years
into the euro zone debt crisis. 
    The weak German data was a catalyst for the initial
risk-asset sell-off, Moore said, but as the North American
session opened, focus turned to fears the fiscal cliff could
crush U.S. economic recovery.
    Separately, European Central Bank President Mario Draghi
said the bank expects the euro zone economy to remain weak "in
the near term". The ECB is expected to maintain its monetary
policy when the group meets this
    "The comments from the ECB ... weighed on sentiment a little
bit so you saw Canada weaken off on that news and I think U.S.
dollar gained some of that safe-haven flow on the risk-off
reaction to it," said Don Mikolich, executive director, foreign
exchange sales at CIBC World Markets.
    A huge rally in Greece involving tens of thousands of
protesters underscored the ongoing unrest over the euro-zone
crisis. The demonstration was held as Greek lawmakers were set
to narrowly pass an austerity package to win aid from lenders.
    Mikolich expected the trading range for the Canadian dollar
to hold to C$0.9850 to U.S. dollar parity in the near term.
    The price of Canadian government debt rose across the curve.
The two-year government of Canada bond was up 9
Canadian cents to yield 1.072 percent, while the benchmark
10-year bond was up 64 Canadian cents to yield 1.736