CANADA FX DEBT-C$ weakens on risk aversion, rate-cut expectations

* Canadian dollar at C$1.2735 or 78.52 U.S. cents
    * Bond prices higher across the maturity curve

    OTTAWA, July 8 (Reuters) - The Canadian dollar weakened
against the greenback on Wednesday as risk aversion gathered
pace in markets around the world and as investors looked at the
possibility of an interest rate cut in Canada as early as next
    * Investors scooped up safe-haven assets such as the yen as
the rout on China's stock markets resumed, raising concerns that
the turmoil will destabilize China's economy. 
    * The Chinese selloff stretched nerves that were already
thin over whether Europe would step in to keep Greece in the
euro zone. The country's prime minister pleaded in the European
Parliament for a fair deal for Greece. 
    * At 9:39 a.m. EDT (1339 GMT), the Canadian dollar 
was at C$1.2735 to the greenback, or 78.52 U.S. cents, weaker
than the Bank of Canada's official close of C$1.2712, or 78.67
U.S. cents, on Tuesday.
    * The currency's strongest level of the session was
C$1.2689, while its weakest was C$1.2768.
    * The Canadian dollar added to its declines to touch a
session low immediately after data showed domestic building
permits fell far more than expected in May. 
    * Recent data has raised concerns the economy is struggling
to regain momentum in the second quarter following a
first-quarter contraction. Investors have raised their
expectations that the Bank of Canada could cut interest rates as
soon as next week, when the bank is scheduled to issue a policy
    * U.S. crude prices were up 0.46 percent at $52.57,
while Brent crude added 1.21 percent to $57.54. 
    * Canadian government bond prices were higher across the
maturity curve, with the two-year price up 3.5
Canadian cents to yield 0.447 percent and the benchmark 10-year
 rising 30 Canadian cents to yield 1.544 percent.
    * The Canada-U.S. two-year bond spread was -13.8 basis
points, while the 10-year spread was -69.8 basis points.

 (Reporting by Leah Schnurr; Editing by Peter Galloway)