CANADA FX DEBT-C$ recovers after drop on Europe elections

* C$ ends higher at C$0.9930 vs US$, or $1.0070
    * Hits near 3-week low after Europe elections rattle
    * Bond prices softer across the curve

    By Jennifer Kwan	
    TORONTO, May 7 (Reuters) - The Canadian dollar recovered on
Monday after stumbling to its lowest level in almost three weeks
against its U.S. counterpart on worries that anti-austerity
election results in Europe could thwart the region's drive to
contain its debt crisis.	
    The currency fought higher and retraced moves in global
equity and commodity markets, which sold off overnight after the
defeat of incumbents in weekend elections in Greece and France.
The results of the elections heightened the uncertainty of the
path ahead for the euro-zone debt crisis. 	
    "There was an initial reaction to some of the uncertainty
from the European elections, which brought commodities down,
equities down, basically risk assets. There's basically a
retracement of a lot of those moves," said Greg Moore, foreign
exchange strategist at TD Securities.	
    Earlier the Canadian dollar touched a low of C$0.9988, or
$1.0012, its weakest level against the greenback since April 17.	
    It finished the session at C$0.9930 versus the U.S. dollar,
or $1.0070, slightly higher than Friday's finish at C$0.9955
versus the U.S. dollar, or $1.0045. 	
    An anti-austerity backlash by voters in Greece and France
shook the euro zone on Monday, causing jitters for the euro
currency and stock markets amid doubts about whether Greece has
a future in the euro.   	
    But by midday on Monday world markets took political
upheaval in Europe largely in stride, with the euro recovering
from sharp losses and local equity markets up. 	
    "I think this market was pretty well positioned for the
results that came out. It's a little bit of the sell-the-rumor,
buy-the-fact scenario unfold," said Matt Perrier, director of
foreign exchange sales at BMO Capital Markets.	
    TD's Moore also said the currency remained supported by the
lingering effects of a more hawkish Bank of Canada. The central
bank surprised investors last month with a more positive
domestic economic outlook and an explicit warning that it may
have to start raising interest rates again.	
    The Bank of Canada has frozen rates at 1 percent since
September 2010 after it became the first in the G7 to raise
borrowing costs from lows hit during the financial crisis.
   Another factor supporting the Canadian dollar on Monday was
upbeat building permits data.	
    The value of Canadian building permits unexpectedly climbed
in March even while plans for home building softened for the
third straight month, Statistics Canada reported on Monday,
likely calming nerves among policymakers troubled by soaring
property prices and debt. 	
    In the short term, BMO's Perrier saw the Canadian currency
trading in a tight range of C$0.9900 to C$0.9938 against the
    Canadian bond prices were flat to softer across the curve,
with Canada's 2-year bond down 4 Canadian cents to
yield 1.271 percent, while the benchmark 10-year bond
 sank 12 Canadian cents to yield 2.032 percent.