* C$ at C$0.9938 to US$, or $1.0062 * Bank of Canada chief Carney to take Bank of England job * Speculation rate hikes will be pushed out boosts debt * Greek deal expected; disappointment could roil markets * Stalled U.S. budget discussions also weigh By Alastair Sharp TORONTO, Nov 26 The Canadian dollar weakened and bond prices rose on Monday after the governor of the Bank of Canada announced he will leave his job next year to head Britain's central bank. The currency dipped sharply, particularly against the British pound, after Governor Mark Carney said he would be changing jobs. It only pared some of those knee-jerk losses as the session progressed. "The immediate reaction was sterling buying, Canadian dollar selling, which speaks to the respect that Carney has with the markets," said Greg Moore, a foreign exchange strategist at TD Securities. The Canadian dollar ended the day at C$0.9938 to the U.S. dollar, or $1.0062, weaker than its Friday close of C$0.9920, or $1.0081. TD's Moore said that the Canadian dollar, notwithstanding major advances in U.S. budget or Greek bailout negotiations, would likely trade between C$0.9920 and parity through the week. Uncertainty over who will replace Carney, and what monetary policy stance that person will bring, gave a boost to short-term debt prices as some traders bet his successor could be more dovish. "The immediate reaction in the market was that rate hikes would get pushed out further that was evidenced by some price action in the front end of our curve," said Ian Pollick, a fixed income strategist at RBC Capital Markets. "But at this point it's a little too early to say." The two-year bond gained 4 Canadian cents to yield 1.105 percent, down from 1.11 percent before the news. The yield had dipped 2 basis points immediately following the news before giving back some of the decline. The benchmark 10-year bond rose 21 Canadian cents to yield 1.763 percent. SURPRISE, UNCERTAINTY AFTER CARNEY MOVE "(The Canadian dollar) has weakened off in light of some uncertainty as to who will head the Bank of Canada come June 2013," said Camilla Sutton, chief currency strategist at Scotiabank. "We are all well versed in where Governor Carney sat in terms of how he judged monetary policy and how he judged the fundamentals in Canada, and so having a new head of the central bank does introduce some uncertainty." She noted that even though Carney had been discussed as a contender for Bank of England governor, most market players had discounted his candidacy and were surprised by the news. Under Carney, the Bank of Canada has held rates steady for two years, and - unusual among major economies - was talking up an eventual raising of rates. Traders were also awaiting the results of Greek debt aid talks on Monday and continued to fret that pending U.S. tax hikes and spending cuts could spur a recession unless action is taken to blunt them. Euro zone finance ministers and the International Monetary Fund were attempting to release emergency aid for Greece for the third time in as many weeks, but they first had to agree if some of the official loans to Athens might eventually be forgiven to cut Greek debt. "The market is probably set up for something fairly decisive today (on Greece)," said Adam Cole, global head of FX strategy at RBC Capital Markets in London. "If they fail to agree yet again it could be quite violently negative." U.S. lawmakers have made little progress in the past 10 days toward a compromise to avoid the "fiscal cliff" of harsh tax increases and government spending cuts due to start on Jan. 1, a senior Democratic senator said on Sunday.