CANADA FX DEBT-Canadian dollar pares losses, bonds turn lower

   * C$ at 96.53 U.S. cents, rises from 1-week low

 * Bond prices turn lower as U.S. stocks futures up

 * Canada finmin: no sign Europe debt crisis spreading

 TORONTO, May 17 (Reuters) - The Canadian dollar cut losses
from the overnight session against the U.S. currency on Monday,
supported by a shift in risk sentiment as North American stock
indexes suggested they would hold up after last week's losses,
and the key oil price also turned higher.

 Canada's currency fell to its lowest in more than a week
against the greenback at C$1.0440 to the U.S. dollar, or 95.79
U.S. cents, caught in the crossfire of the euro falling to a
four-year low.

 Investors in the overnight Asia session worried that
Europe's austerity measures would stifle a recovery, pulling
down stocks and other riskier currencies.

 Canada's Finance Minister Jim Flaherty said Europe was
following the right path to manage the debt crisis plaguing a
group of countries and said there were no signs that the crisis
was spreading beyond Greece, Spain and Portugal.
[ID:nSGE64G0G1]

 At 8:15 a.m. (1215 GMT), the Canadian dollar CAD=D4 was
at C$1.0359 to the U.S. dollar, or 96.53 U.S. cents, down from
C$1.0317 to the U.S. dollar, or 96.93 U.S. cents, at Friday's
close.

 "We're starting a bit on the defensive, but again no fault
of Canada but more of the global sentiment," said Matthew
Strauss, senior currency strategist at RBC Capital Markets.

 "It seems at least that the European and North American
markets are starting with a slightly better sentiment tone from
where they ended last week."

 He said there appeared to be momentum behind the Canadian
dollar to head higher as North American equity markets looked
set to hold their ground at the open, while key crude prices
also turned higher from the overnight session.

 Canadian government bond prices were lower across the board
as U.S. stocks futures were bolstered by a wave of mergers and
acquisitions.  [.N]

 The two-year government bond CA2YT=RR dipped 3 Canadian
cents to C$99.34 to yield 1.834 percent, while the 10-year bond
CA10YT=RR lost 15 Canadian cents to C$100.40 to yield 3.453
percent.
 (Reporting by Ka Yan Ng; Editing by Chizu Nomiyama)