CANADA FX DEBT-C$ rebounds from 2-week low on ECB comments

* C$ up at C$1.0185 vs US$, or 98.18 U.S. cents
    * Bond prices lower across the curve

    By Claire Sibonney
    TORONTO, July 25 (Reuters) - The Canadian dollar recovered
from a near two-week low on Wednesday, tracking the euro and
global shares higher after a European Central Bank policymaker
said there were reasons to boost the firepower of the euro
zone's new bailout fund.
    Governing Council member Ewald Nowotny said there were
arguments for giving Europe's permanent rescue fund a banking
license which would allow it to borrow unlimited ECB money, an
idea that the central bank has rejected so far. 
    "That gave markets a bit of a boost pretty much across the
board and that enabled them to overlook the ... poor data
overnight," said Benjamin Reitzes, senior economist and foreign
exchange strategist at BMO Capital Markets.
    Investors have become increasingly worried that the force of
the new fund would be hugely diminished if, as widely expected,
Spain needs a full scale sovereign bailout on top of the rescue
deal for its banks.
    Weighing on global sentiment earlier, data showed Britain's
economy shrank deeper into recession than expected in the second
quarter of 2012, battered by everything from an extra day's
holiday to budget austerity and the neighboring euro zone
    German business sentiment also dropped in July to its lowest
level in more than two years, adding to signs that Europe's
largest economy is losing momentum along with its immunity to
fallout from the region's deepening problems. 
    At 8 a.m. (1200 GMT), the Canadian dollar stood at
C$1.0185 versus the greenback, or 98.18 U.S. cents, up from
Tuesday's North American session close at C$1.0204 versus its
U.S. counterpart, or 98.00 U.S. cents. Overnight, it hit
C$1.0232, or 97.73 U.S. cents, its weakest level since July 12.
    In the absence of any major North American data, TD
Securities noted that the low C$1.02 area remains supportive for
the Canadian dollar, near the 40-day moving average at C$1.0224.
Resistance for Canada's currency was seen around C$1.0130-60.
    Canadian bond prices slid across the curve with the two-year
bond off 4 Canadian cents to yield 0.950 and the
benchmark 10-year bond down 25 Canadian cents to
yield 1.603 percent.