CANADA FX DEBT-C$ slides to near-week low on China, Portugal

* C$ falls to C$0.9656, or $1.0356

* China rate hike, Portugal debt spoil risk appetite

* Bond prices stronger, Canada slightly outperforms

TORONTO, July 6 (Reuters) - Canada’s dollar weakened against its U.S. counterpart on Wednesday, touching its lowest point in almost a week, after China’s rate hike and a downgrade of Portugal’s debt fueled buying of the safe-haven greenback.

China raised interest rates for the third time this year, making clear that taming inflation remains a top priority even as its vast economy pauses. [ID:nL3E7FK17V]

Portugal’s credit downgrade by ratings agency Moody’s also reignited fears about euro zone debt just as concerns over Greece ebbed. [MKTS/GLOB]

The Canadian dollar’s fall reflects “ongoing risk aversion because of concerns about Europe’s credit crisis,” said Sal Guatieri, senior economist at BMO Capital Markets.

China’s tightening also raises concerns about a hard economic landing there, which would undermine commodity prices and hurt the Canadian dollar, he said.

Canada is a major commodities exporter and moves in the asset class often set the Canadian dollar's direction. The Thomson Reuters-Jefferies CRB index .CRB, a global commodities benchmark, fell 0.42 percent on Wednesday.

Canada’s currency was weaker against the U.S. dollar for the third straight day on Wednesday, closing at C$0.9656, or $1.0356, down from Tuesday’s finish of C$0.9632, or $1.0382. Earlier in the session it fell as low as $0.9695, it’s weakest point since June 30.

The Canadian dollar did strengthen against the euro as Portugal’s government bond yields hit lifetime highs, causing the common European currency to plunge.

Guatieri said that the direction of the Canadian dollar in the near-term could depend on employment data from both sides of the border coming out on Friday. He noted that there would be a greater focus on the U.S. number. ECONCA

“If we see positive U.S. jobs that would generally support the (Canadian) currency because it would allay fears of a soft patch,” he said.

Currency analysts polled by Reuters expect Canada’s dollar to stick to current levels over the next few months as the central bank holds rates steady, but they say a wide array of global risks threatens to drag it closer to parity with the U.S. dollar within 12 months. [CAD/POLL]

Canadian bond prices were higher across the curve, helped by investors seeking safe-haven asset.

The five-year bond CA5YT=RR was up 14 Canadian cents to yield 2.258 percent, while the 30-year bond CA30YT=RR rose 36 Canadian cents to yield 3.498 percent. Canadian bonds outperformed their U.S. counterparts. CABONEA

Canada’s sale of five-year government bonds met with muted demand on Wednesday, as a recent decline in yields curbed the interest of many investors. [CA/AUC] (Editing by Jeffrey Hodgson)