CANADA FX DEBT-C$ hits 7-1/2-month low vs euro; softer vs dollar

* C$ at 0.9873 vs US$, or $1.0129
    * C$ lowest since May 1 against euro
    * Bonds weaker across curve

    By Solarina Ho
    TORONTO, Dec 19 (Reuters) - The Canadian dollar was weaker
against its U.S. counterpart on Wednesday, trending with other
commodity currencies, as many investors looked to book profits
ahead of the holidays following a recent rally to two-month
    Canada's dollar ran counter to world shares, which hit
17-month highs, and the surging euro. Investor hopes grew for a
year-end budget deal in the United States and for further
monetary stimulus from the Bank of Japan.
    "I think this is probably some profit-taking heading into
the holidays, because the market was quite short USD/CAD.
Definitely some technical levels have broken on some of the
Canada crosses ... It's had a very decent rally," said David
Bradley, director of foreign exchange trading at Scotiabank.
    "It's been really strange, the way its traded recently ...
Most correlations have broken down." 
    At 9:07 a.m. (1407 GMT), the Canadian dollar stood
at C$0.9873 versus the U.S. dollar, or $1.0129, weaker than
Tuesday's North American finish at C$0.9857, or $1.0145.
    Bradley said the currency's strength has stalled around the
C$0.9825 level against the U.S. dollar, and noted a lot of
interest to sell toward C$0.9882.
    Against the euro, it fell to its lowest level since May 1 at
C$1.3131, or .7616 euros. 
    The currency did not react to a smattering of North American
data, including Canadian wholesale trade, which expanded by a
stronger-than-expected 0.9 percent in October. 
    Canada was underperforming most major currencies except
other commodities-linked currencies and the Japanese yen. It
touched its weakest level against the euro since May 1.
    A key business survey in Germany suggested that Europe's
biggest economy was likely to bounce back quickly from its
slowdown. The growing confidence in the outlook lifted the euro
to a 16-month high against the yen and an 8-1/2 month peak
versus the U.S. dollar.  
    Canadian government bond prices were lower across the curve.
The two-year bond was down 1 Canadian cent, yielding
1.158 percent, while the benchmark 10-year bond shed
20 Canadian cents to yield 1.862 percent.