* Canadian dollar at 97.50 U.S. cents
* Bonds regain favor as doubts renewed
TORONTO, May 11 (Reuters) - The Canadian dollar edged lower against the U.S. dollar on Tuesday as the relief rally arising from the announcement of a massive European rescue deal waned.
Second thoughts about the "shock and awe" emergency aid package in Europe drove down riskier assets, which had surged in the previous session, including the Canadian dollar.
The commodity-linked Canadian currency's move lower also coincided with a fall in the price of oil, with U.S. crude slipping below $76 a barrel. [O/R]
Still, the currency managed to hold in a range as the euro remained the center of attention. [FRX/]
"Right now Canada is a bit of a sideshow," said Jon Gencher, a director of foreign exchange sales at BMO Capital Markets.
"The market is focused on the euro and the euphoria with which the market reacted to the package is already fading. The overwhelming question...is will it be enough to prevent an eventual debt restructuring?"
At 8:00 a.m. (1200 GMT), the Canadian dollarwas at C$1.0256 to the U.S. dollar, or 97.50 U.S. cents, down slightly from C$1.0243 to the U.S. dollar, or 97.63 U.S. cents, at Monday's close. It soared almost 2 percent against its U.S. counterpart on Monday.
There is no major Canadian or U.S. economic data due on Tuesday.
Canadian government bond prices gained across the curve as safe-haven assets found demand after doubts reemerged about Europe's fiscal woes in spite of a massive aid deal.
The move tracked U.S. Treasuries, which also rose, as the rally in world equity markets ran out of steam. [MKTS/GLOB]
The two-year government bondrose 5 Canadian cents to C$99.19 to yield 1.904 percent, while the 10-year bond shed 35 Canadian cents to C$99.65 to yield 3.542 percent. (Reporting by Ka Yan Ng; Editing by Theodore d'Afflisio)
Our Standards: The Thomson Reuters Trust Principles.