* C$ ends at 94.76 U.S. cents
* Fall of 1.8 pct is biggest drop since May 20
* Bonds firmer as investors shun risk
* Canada rate hike expectations continue to ease (Updates throughout)
By Ka Yan Ng
TORONTO, June 29 (Reuters) - The Canadian dollar hit its weakest level in three weeks against the greenback on Tuesday, rocked by worries about world economic growth.
Markets that often influence the movement of the Canadian currency fell hard, with the price of oil off more than 3 percent and world stocks under pressure in a new wave of risk aversion.
The Canadian dollar CAD=D4 ended at C$1.0553 to the U.S. dollar, or 94.76 U.S. cents, down sharply from Monday's finish at C$1.0358 to the U.S. dollar, or 96.54 U.S. cents.
It spent the entire North American session in negative territory and dropped as low as C$1.0575 to the U.S. dollar, or 94.56 U.S. cents. The 1.8 percent drop was the biggest since May 20, when it fell more than 2 U.S. cents.
The currency's move to a June 8 low coincided with a new 2010 low on the S&P 500 index. .SPX
"That's pretty much hand in hand with the way you just saw a downtick in the Canadian dollar," said Sacha Tihanyi, currency strategist at Scotia Capital, noting the weakness got rolling in the overnight session.
Focus was on a series of soft economic reports and concern about bank repayments to the European Central Bank, which pulled the euro sharply lower. [FRX/] [ID:nN29137639]
The hit to sentiment started when the Conference Board revised its leading economic index for China to a 0.3 percent gain in April from the 1.7 percent rise the group had reported earlier. [ID:nN29126233]
More pressure came from a report that showed U.S. consumer confidence dropped in June. Canadian data was mixed as factory prices rose in May, but consumer confidence faltered in June. [ID:nN29138077] [ID:N29136753]
The weakness of recent economic data is making the market a little more dovish on the speed at which it expects the Bank of Canada to raise interest rates, Tihanyi said.
BOND PRICES JUMP
The increasing focus on the tenuousness of the economic recovery has seen a sharp turnaround in interest rate hike expectations. Yields on overnight index swaps, which trade based on expectations for the central bank's key policy rate, now point to a less than 60 percent chance of a 25 basis point hike on July 20. That is down from around 80 percent last week. BOCWATCH
That has helped Canadian government bond prices rise recently. On Tuesday, they surged across the board, tracking U.S. Treasuries, as equity markets dropped on worries over euro-zone debt problems and the uneven global economy.
"It's clearly events overseas beginning with some question markets about growth in China, and then obviously today's consumer confidence report in the U.S. was a surprise on the downside in terms of economic growth," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
"So the near-term momentum in the global economy, that notion has been challenged by some of the recent indicators."
The two-year government bond CA2YT=RR climbed 23 Canadian cents to yield 1.383 percent, while the 10-year bond CA10YT=RR rose 52 Canadian cents to yield 3.104 percent. (Additional reporting by Jennifer Kwan; editing by Peter Galloway)