CANADA FX DEBT-C$ eases as worries over Fed outlook set in

 * C$ slips to 96.35 U.S. cents

 * Bonds prices extend gains

 TORONTO, Aug 11 (Reuters) - The Canadian dollar extended
its decline against the greenback on Wednesday morning as
investors digested the Federal Reserve's pessimistic view of
the U.S. economy, leading them to shed riskier assets.

 In a move to reinvigorate a weakening economic recovery,
the Fed said on Tuesday it would use cash from maturing
mortgage bonds it holds to buy more government debt to help pin
down borrowing costs. [ID:nN09275781]

 The market decided the U.S. central bank's action was
unlikely to have much immediate impact on the weak labor market
and slow consumer spending, spurring investors to adopt a more
risk averse position, bolstering the greenback against all
major currencies excluding the yen. [FRX/]

 "Things are not looking upbeat this morning for the
Canadian dollar because we have the global risk backdrop (of)
equities selling off, commodities under pressure, oil again
below $80 a barrel, and the flipside of that is broad-based
U.S. dollar strength as well," said Matthew Strauss, senior
currency strategist at RBC Capital Markets.

 Strauss also pointed to Chinese data on Wednesday showing
slowing investment and factory output growth and Tuesday's
softer-than-expected import figures as significant drivers
behind the risk aversion theme.

 At 7:57 a.m. (1157 GMT), the currency CAD=D4 was at
C$1.0379 to the U.S. dollar, or 96.35 U.S. cents, down from
Tuesday's finish at C$1.0323 to the U.S. dollar, or 96.87 U.S.
cents.

 In domestic economic data, currency players will also be
watching Canada's trade balance figures for June.

 The consensus calls for a deficit of C$0.3 billion but RBC
expects a more dire figure of C$1 billion, as the energy
component will start to reflect weaker crude oil prices while
the automotive component is seen reversing some of the increase
in May.

 If the data disappoints, Strauss said that will add to the
day's negative environment for the Canadian dollar.

 "We could potentially see dollar/CAD pushing above C$1.04,
which from a technical perspective would be an important break
because it would move above the 200-day moving average, which
is currently just under C$1.04 at C$1.0395," said Strauss.

 "A close above that level would be a bullish technical
signal for dollar/Canada to move even higher."

 Canadian bond prices extended their gains across the curve
a day after the Fed's announcement, tracking U.S. Treasuries
higher, with the U.S. 2-year Treasury note yields hitting a
record low. [US/]

 The two-year bond CA2YT=RR edged up 4 Canadian cent to
yield 1.421 percent, while the 10-year bond CA10YT=RR added
17 Canadian cents to yield 3.013 percent.
  (Reporting by Claire Sibonney; Editing by Theodore
d'Afflisio)