CANADA FX DEBT-C$ weakens to 1-month low on 'fiscal cliff' worry
* C$ weakens to C$0.9959 vs US$, or $1.0041, one-month low * Reid's pessimism on budget deal sends investors to safety * Bond prices mostly higher By Andrea Hopkins TORONTO, Dec 27 (Reuters) - The Canadian dollar weakened to a one-month low against its U.S. counterpart on Thursday, as investors fled to safety after comments by the top Democrat in the U.S. Senate warning the country looked to be headed over the "fiscal cliff" of tax hikes and spending cuts. Majority Leader Harry Reid told the Senate in a speech that "it looks like that is where we're headed." U.S. stocks added to losses after Reid's comment while world stocks dipped into negative territory, the U.S. dollar rose and the euro dipped. The euro and riskier currencies tend to benefit when U.S. budget negotiations run smoothly, but when there are snags, investor flows go into the safe-haven and highly liquid dollar. "Today it is about the headlines on the fiscal cliff and risk aversion and the U.S. dollar getting a bit of a safe-haven bid," said Shaun Osborne, chief currency strategist at TD Securities. "We've had some short-end Treasury bills go negative as people move into safe havens, and I think that is an indicator of where money is going to flow as the fiscal cliff looms even larger in the next few days." At 2:35 p.m. (1935 GMT), the Canadian dollar stood at C$0.9959 versus the U.S. dollar, or $1.0041, down from Monday's North American session close at C$0.9913 versus the U.S. dollar, or $1.0088, and at its weakest level since Nov. 28. North American markets were closed on Dec. 25 and most Canadian markets remained shut on Wednesday for Boxing Day, so Thursday was the first day of normal trade since markets closed on Monday, Christmas Eve. Reid called on the Republicans who control the House of Representatives to prevent the worst of the fiscal shock by getting behind a Senate bill to extend existing tax cuts for all except those households earning more than $250,000 a year. With the House not in session and the clock ticking toward the scheduled January start of tax increases and deep, automatic government spending cuts, Reid offered little hope. "I don't know time-wise how it can happen now," he said. TD's Osborne said the Canadian dollar is likely to weaken towards parity in the "not so distant" future, given the global worries over U.S. economic growth and its knock-on effect on Canadian growth should the U.S. fail to reach a budget deal. "I think we're looking at a return towards the recent November highs around C$1.0050, (that's) a pretty reasonable objective over the next week or so," Osborne said. Canadian government bond prices were mostly higher on the flight to safety. The two-year bond was down 1 Canadian cent, yielding 1.130 percent, while the benchmark 10-year bond rose 33 Canadian cents to yield 1.782 percent.