* C$0.9902 vs US$, or $1.0010
* Italy downgrade offset by Greece coupon payment
* Investors expect dovish tone from Carney at 1145/1545
TORONTO, Sept 20 (Reuters) - The Canadian dollar was
slightly weaker against its U.S. counterpart in early trade on
Tuesday as worries over Europe continued to weigh, but strength
in global equities was expected to buoy the Canadian currency.
Negative reaction to Standard & Poor's downgrading of
Italian debt was short-lived on financial markets, with
European shares up strongly and Wall Street for a solid start.
The euro also recovered from earlier losses. [MKTS/GLOB]
Investors took some comfort in struggling Greece paying a
coupon on its debt and reports that the European Central Bank
had been buying Italian debt.
"What appears to be the biggest influential factor in terms
of the rise of the euro and the rise in European equities this
morning is talk that Greece has been able to meet their 750
million coupon payment that was today," said Jack Spitz,
managing director of foreign exchange at National Bank
The renewed appetite and bargain hunting in equities is
likely to pull investors from safe havens like the U.S. dollar,
which bodes well for a stronger Canadian dollar later in the
session, Spitz said.
"There is a temporary disconnect between currency
valuations and what is happening ultimately with equities
posting gains. The U.S. dollar should be weaker across the
board but we're not seeing that quite yet."
At 8:04 a.m. (1204 GMT), the Canadian dollar
at C$0.9902 to the U.S. dollar, or $1.0010 U.S. cents, down
slightly from Monday's North American session close of C$0.9897
to the U.S. dollar, or $1.0104 U.S. cents.
Spitz said the market is expecting a dovish tone from Bank
of Governor Mark Carney when he speaks in New Brunswick at
11:45 EDT (1545 GMT) in an address to the Saint John Board of
Trade on the economic outlook.
"He'll be dovish. He's already changed his position from
hawkish to neutral and the next logical progression provided
that the global economy continues to be challenged is he will
go dovish. Is a rate cut on horizon? According to the futures
market, perhaps by the end of the year, but that could still be
scaled back," Spitz said.
"The real issue for Carney will be the strength in the
Canadian dollar and what kind of a headwind that is for
economic growth in this country."
He noted intraday resistance levels for the Canadian dollar
at C$0.9940, in line with highs in Europe and London overnight,
and light support at C$0.9865.
Bond prices were lower across the curve.
The two-year bond
was down 2 Canadian cents to
yield 0.944 percent, while the 10-year bond was
down 20 Canadian cents to yield 2.207 percent.
(Editing by Theodore d'Afflisio)