* Risk aversion, soft oil price push C$ lower
* Bonds rise on safe haven play
TORONTO, May 26 (Reuters) - The Canadian dollar fell against the U.S. dollar on Tuesday morning, hit by risk aversion and lower oil prices.
World stocks fell as tension about North Korean nuclear tests fueled debate over the global economic outlook, while the greenback firmed, but remained near a five-month low hit last week against a basket of currencies. [MKTS/GLOB]
Meanwhile, the price of oil, a key Canadian export and often a factor that determines the Canadian dollar's direction, fell under pressure from a firmer U.S. dollar and expectations an OPEC meeting later this week would keep the producer group's output unchanged. [ID:nSYD496746]
At 8:20 a.m. (1220 GMT), the Canadian unit was at C$1.1284 to the U.S. dollar, or 88.62 U.S. cents, down from C$1.1235 to the U.S. dollar, or 89.01 U.S. cents, at Monday's close.
Overnight, it reached as low at C$1.1356 to the U.S. dollar, or 88.06 U.S. cents, before paring losses.
"Ultimately where this market goes today will be primarily based on how equities revalue themselves. Currently they're mostly painting red right now," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
Market players said the focus would largely be driven by U.S. data and a close watch on the U.S. Treasury's $101 billion debt auction this week, with the first leg on Tuesday a two-year sale.
Given ongoing concerns about rising U.S. debt levels, markets will also monitor the U.S. Treasury's five- and seven-year debt auctions this week. The auction is a test of investor appetite for U.S. dollars and U.S. dollar assets.
There is no Canadian economic data until Friday when the current account balance for the first quarter is due, however, first-quarter GDP figures next Monday will likely be more important for market direction ahead of the Bank of Canada's next interest rate announcement on June 4.
Meanwhile, Canadian bonds headed higher, boosted by their safe haven appeal as equity markets fell.
Canadian bonds were relatively unchanged on Monday when the U.S. Treasury market was closed for the Memorial Day holiday, but the bond market is likely to perk up with the upcoming U.S. Treasury auction and a raft of U.S. housing data on tap this week.
Market players will be looking for signs that the U.S. housing market is stabilizing.
The benchmark two-year government bond edged up 5 Canadian cents to C$100.20 to yield 1.151 percent, while the 10-year bond gained 20 Canadian cents to C$104.10 to yield 3.267 percent.
The 30-year bond was up 5 Canadian cents at C$117.25 to yield 3.974 percent. (Reporting by Ka Yan Ng; Editing by Theodore d'Afflisio)
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