* Canada Liberals will vote against government
* C$ hit intraday low after Liberal leader spoke
* Bonds stronger as stocks weaken; eye on Friday jobs data (Updates to close)
TORONTO, Sept 1 (Reuters) - Canada's dollar ended lower for the third straight session on Tuesday as economic concerns sent investors into safe havens like the U.S. greenback while the threat of a federal election also dealt the currency a blow.
The move out of the Canadian dollar intensified during the second half of the North American session after the country's official opposition Liberal Party said it would not support the minority Conservative government. [ID:nN01496127]
The news makes a fourth election in just over five years seem very likely and quickly sent the Canadian dollar to its lowest level of the day when it touched C$1.1068 to the U.S. dollar, or 90.35 U.S. cents.
Political uncertainty tends to put pressure on a country's currency.
"Generally speaking the rule of thumb is that the Canadian dollar does tend to be a little more volatile during elections simply because of some uncertainty over policy," said Doug Porter, deputy chief economist at BMO Capital Markets.
"But I think it's important to point out the fact that the U.S. dollar is on a bit of tear today in any event, even before this announcement, and I think it just really compounds what had already been an ugly backdrop for the Canadian dollar."
The Canadian dollar had been pinned lower for most of the first half of the session as investors concerned that stock prices have run too far ahead of the economic recovery opted to pocket recent gains and unload riskier assets, which helped boost the greenback's safe haven appeal.
The Canadian dollar closed at C$1.1041 to the U.S. dollar, or 90.57 U.S. cents, down from C$1.0950, or 91.32 U.S. cents, at Monday's close.
That was well off C$1.0910 to the U.S. dollar, or 91.66 U.S. cents, a level it reached after data that showed the U.S. manufacturing sector grew in August, boosting the appeal of riskier assets. [ID:nWEN2981]
But the gains were short-lived as investors questioned the validity of a rally that has put Toronto stocks about 43 percent above the five-year low hit in March.
The choppy trading conditions that knocked the Canadian dollar around in a wide range were also attributed partly to the lower liquidity of the late summer period.
BONDS STICK HIGHER
Canadian bond prices recouped early losses and finished higher across the curve as the drop in equities sparked demand for more secure assets such as government debt.
But analysts noted price moves are likely to be limited ahead of the key Canadian and U.S. jobs data on Friday.
"Realistically we are sort of trapped in these ranges ahead of the payrolls numbers on Friday in both countries," said Mark Chandler, fixed income strategist at RBC Capital Markets.
Friday's key jobs report is expected to show Canada shed 10,000 jobs in August, while the unemployment rate is pegged to rise to 8.7 percent. U.S. jobs data is also due on Friday.
Domestic bond prices held steady after the political announcement.
Earlier, price guidance was set on Canada's $3 billion five-year global note. Chandler said there appeared to be strong demand for the offering. [ID:nN01482265]
Canada said last week it planned to issue a U.S. dollar bond for the first time in a decade, in part to help to meet obligations made to the International Monetary Fund. [ID:nN28386471].
The two-year bondrose 7 Canadian cents to C$99.52 to yield 1.244 percent, while the 10-year bond ended up 19 Canadian cents at C$103.31 to yield 3.348 percent.
The 30-year bondadvanced 20 Canadian cents to C$118.95 to yield 3.878 percent.
Canadian bonds underperformed their U.S. counterparts across much of the curve. The Canadian 10-year bond yield was about 2.20 basis points below its U.S. counterpart, compared with 3.20 basis points on Monday. (Additional reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)
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