CANADA FX DEBT-C$ gives back gains on renewed risk aversion

   * C$ falls to 94.48 U.S. cents

 * Bond prices firmer across curve

 TORONTO, July 7 (Reuters) -  The Canadian dollar weakened
against its U.S. counterpart on Wednesday, giving back gains
from the previous day's risk rally as weak U.S. economic data
kept investors worried that global economic growth was
faltering.

 Sentiment was hurt by a reading on service sector activity
on Tuesday that showed growth in June, but at its slowest pace
since February, heightening concerns about sluggish recovery.
For details, see [ID:nN06102990]

 Following a burst of bargain hunting, global stock indexes
and U.S. futures fell along with the price of oil, copper and
commodity-linked currencies such as Canada's. [MKTS/GLOB]

 "Risk rallies as we've seen on Tuesday are not sustainable
if it's not supported by underlying fundamentals," said Matthew
Strauss, senior currency strategist at RBC Capital Markets.

 "Now we're seeing again an unraveling of that and even a
reversal as the market focuses again on global growth concerns
... It's becoming increasingly clear that a smooth recovery is
going to make way for a more patchy recovery."

 Worries about a Europe-wide stress test for banks also
played into the risk-aversion theme.

 The euro, a recent proxy for risk appetite, slipped off
seven-week highs as investors awaited details of plans to test
the health of European banks. [FRX/]

 At 8:08 a.m. (1208 GMT), the Canadian dollar CAD=D4 was
at C$1.0585 to the U.S. dollar, or 94.48 U.S. cents, lower than
Tuesday's finish at C$1.0557 to the U.S. dollar, or 94.72 U.S.
cents.

 From a technical perspective, Strauss said a descending
trendline from March 2009 was in play at C$1.0643, as well as
the double top at C$1.0679.

 He said breaching those marks would expose the Canadian
dollar to its weakest 2010 level at C$1.0853.

 On the domestic data front, investors will keep an eye on
the Ivey Purchasing Managers Index for June at 10 a.m. (1400
GMT).

 Canadian government bonds and U.S. Treasury debt prices
firmed as investors played it safe while they assessed the risk
of a double-dip recession in the U.S. economy. [US/ECI]

 The two-year government bond CA2YT=RR was up half a
Canadian cent to yield 1.414 percent, while the 10-year bond
CA10YT=RR added 6 Canadian cents to yield 3.066 percent.
  (Reporting by Claire Sibonney; editing by Jeffrey Benkoe)