* C$ ends at 96.74 U.S. cents, rebounds from 1-week low
* Bond prices lower across the curve (Updates to close, adds details, quotes)
TORONTO, May 17 (Reuters) - The Canadian dollar pared steep losses against the U.S. currency on Monday, but still ended slightly lower as global risk aversion continued to play out over nagging worries about Europe's debt crisis.
The euro also rallied from a four-year low versus the greenback, helped by a turnaround in U.S. stocks, which temporarily offset fears that euro zone austerity measures could trigger a downturn in the region. [FRX/]
"I think the market just needs to a get a little more comfortable with what's transpired, plus the new valuation for euro, plus what lies ahead for the euro zone itself," said Camilla Sutton, currency strategist at Scotia Capital.
Canadian Finance Minister Jim Flaherty said Europe was following the right path to manage the debt crisis, and said there were no signs the crisis was spreading beyond Greece, Spain and Portugal. [ID:nSGE64G0G1]
Also weighing on the commodity-linked currency, crude prices fell below $70 a barrel, pushed down by concerns about Europe's economy, the weak euro, swollen U.S. oil inventories and worries that China's growth may be slowing [O/R]
With no major economic announcements or key euro zone developments to take direction from, Sutton said the market was trying to stabilize.
The Canadian dollarclosed the North American session at C$1.0337 to the U.S. dollar, or 96.74 U.S. cents, down from Friday's finish at C$1.0317 to the U.S. dollar, or 96.93 U.S. cents.
Earlier, in the overnight session, the currency fell to its lowest level in more than a week at C$1.0440 to the U.S. dollar, or 95.79 U.S. cents, caught in the crossfire of euro selling.
"I think as we look ahead, Canada should still strengthen," Sutton said.
"On a relative basis it's poised to do quite well. So we would expect it to continue to strengthen once we get through this spike in risk aversion."
Sutton said key levels of support and resistance for the currency rest between the 100-day moving average of C$1.0316 to the U.S. dollar and the 200-day moving average of C$1.0494.
BONDS ALSO PRESSURED
Canadian government bond prices were lower across the curve as investors awaited key retail sales and inflation data later in the week.
"We know the Bank of Canada is going (to raise interest rates) in June or it's going in July. We know that the bank is completely data-dependent at this point," said said Ian Pollick, a portfolio strategist at TD Securities.
"Those are the two real last pieces of information we need ... That will really give us a good sense of what the bank is going to do."
Bond prices tend to fall when interest rates go up as their low-yielding fixed payments seem less lucrative compared with rising yields on other investments.
The two-year government bonddipped 11 Canadian cents to C$99.25 to yield 1.877 percent, while the 10-year bond <CA10YT=RR dropped 60 Canadian cents to C$99.95 to yield 3.506 percent.
Canadian bonds lagged their U.S. counterparts with the Canadian 10-year bond yield almost 2 basis basis points above the U.S. 10-year yield, compared with 2.2 basis points below on Friday.
"Today's just one of those days where we're seeing light flows across the market. It's pretty much dead to be honest with you," said Pollick. (Reporting by Claire Sibonney; editing by Rob Wilson)
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