CANADA FX DEBT-C$ sags as investors doubt Europe summit

* Currency ends at 97.16 U.S. cents
    * C$ touches lowest since June 12
    * Bonds climb as investors shun risk

    By Jennifer Kwan
    TORONTO, June 25 (Reuters) - Canada's dollar fell against
its U.S. counterpart on Monday and bond prices rose as global
markets were rattled on investor fears policymakers at a
European summit this week would make little progress in solving
the region's debt crisis.
    The euro weakened broadly, global equities fell sharply and
the U.S. dollar and the price of North American government debt
rose as investors sought safety ahead of the June 28-29 meeting
of European Union leaders. On Monday, Cyprus became the fifth
euro zone country to seek EU aid.   
    "We have a general risk-off day so we have oil prices
weaker, equity prices weaker, as I think there's concern that
the EU summit will disappoint at the end of the week, and that
global growth concerns are a major worry," said Camilla Sutton,
chief currency strategist at Scotiabank.
    The Canadian currency finished at C$1.0292 to the
greenback, or 97.16 U.S. cents. Earlier, it touched C$1.0318,
its weakest against the greenback since June 12.
    It finished its North American session on Friday at C$1.0246
to the greenback, or 97.60 U.S. cents.
    The negative backdrop had been set as Spain formally
requested euro zone rescue loans on Monday to recapitalise banks
that are laden with bad debts. Later, Cyprus announced it was
seeking a lifeline for its banks and its budget.
    Cyprus joins Greece, Ireland, Portugal and Spain in seeking
EU rescue funds, meaning more than a quarter of the 17 euro zone
members are now in the bloc's emergency ward. Italy's funding
costs have soared too, which means it could be next.
    German Chancellor Angela Merkel dashed any lingering hope in
financial markets that Europe would issue common euro zone bonds
to underpin its single currency after Spain formally became the
fourth state to request a financial rescue. 
    "The markets are starting the week on a sour note, all
relating to Europe," said Blake Jespersen, a managing director
foreign exchange sales at BMO Capital Markets.
    Jespersen said Canada's dollar, which notched a mixed
performance against most of its major currency peers but
outperformed the New Zealand and Australian dollars, would
likely trade a range of C$1.0250-C$1.04 in the near term.
    "There's no real Canadian data on the calendar until Friday
so the Canadian dollar is going to take its cues from what's
going on in Europe and the overall theme in the market. So
expect that to be quite negative this week," he said.
    Markets will await domestic growth data for April due out on
Friday, as well as industrial product and raw materials price
    Canadian bonds mirrored moves in U.S. Treasuries, which were
higher as investors flocked to safety on doubt that the European
summit would successfully resolve the region's debt crisis.
    The two-year Canadian government bond climbed 14
Canadian cents to yield 1.002 percent, while the benchmark
10-year bond was up 76 Canadian cents to yield 1.728
percent. The 30-year bond yielded 2.301.