*C$ hits Jan. low below parity against greenback
*C$ rallies to July high versus euro
*Bond prices rally across curve
By Claire Sibonney
TORONTO, Sept 12 (Reuters) - The Canadian dollar fell below parity against the U.S. dollar on Monday to its weakest level in more than seven months as risk sentiment continued to deteriorate on growing fears of a Greek default.
Canada's dollar CAD=D4 fell as low as C$1.0016 to the greenback, or 99.84 U.S. cents, its weakest level since Jan. 31.
Against the euro however, the Canadian dollar climbed to C$1.3495, or 74.10 euro cents, its strongest level since July.
Meanwhile, the euro tumbled to a 10-year low against the yen as investor confidence in the currency bloc's ability to surmount a sovereign debt crisis ebbed and worries turned to contagion in the region's banking system and larger economies. [FRX/]
"The market as we know turns to the U.S. dollar in times of dire stress and with that we've seen the U.S. dollar continue to push stronger," said Steve Butler, director of foreign exchange trading at Scotia Capital.
The Canadian dollar was still hanging in relatively well, he noted, outperforming the euro as well as other commodity currencies such as the Australian and New Zealand dollars.
"At the end of the day, Canada is still in a better situation than most and although our jobs number wasn't great on Friday it wasn't terrible either."
Risk aversion was further exacerbated by the failure of the weekend's meeting of finance ministers from the Group of Seven industrialized nations to come up with any fresh proposals for boosting global growth. [ID:nN1E78728T] [ID:nL5E7KC0KE]
At 8:01 a.m. (1201 GMT), the Canadian dollar stood at C$1.0002 to the U.S. dollar, or 99.98 U.S. cents, down from Friday's North American session close at C$0.9960 to the U.S. dollar, or $1.0040.
Butler said the C$1.0060 level hit in January should hold in reasonably on Monday but was wary of calling the next topside level with so much risk aversion in the market.
He noted that more interest to buy Canadian dollars should come in around C$1.01.
Canadian bond prices edged higher across the curve.
The two-year bond CA2YT=RR was up 4 Canadian cents to yield 0.762 percent, while the 10-year bond CA10YT=RR gained 17 Canadian cents to yield 2.095 percent.
(Reporting by Claire Sibonney, Editing by Chizu Nomiyama)