CANADA FX DEBT-C$ weakens to three-week low on Greek crisis

* C$ ends at C$0.9983 vs US$, or $1.0017
    * Touches 3-week low of C$1.0023 vs US$
    * Riskier assets stumble on Greek uncertainty
    * Bond prices push higher across curve

    By Jennifer Kwan	
    TORONTO, May 8 (Reuters) - Canada's dollar dropped to a
three-week low against its U.S. counterpart on Tuesday as
Greece's struggle to form a new government fueled investor
worries about Europe's ability to fend off a deeper crisis in
the region.	
    Global equity, currency and commodity markets were rattled
as Greece's political crisis intensified after a candidate for
prime minister renounced the terms of a bailout that is keeping
the country's finances afloat.   	
    "It's a risk aversion move. We have a U.S. dollar that is
strong right across the board," said Camilla Sutton, chief
currency strategist at Scotiabank.	
    Canada's dollar had risen sharply following a more hawkish
stance by the Bank of Canada last month. But traders have been
paring back their expectations of a Canadian rate hike in recent
sessions, reducing the appeal of the currency.	
    "European conditions are continuing to unfold on the sour
side. People are coming to the realization that maybe we got
ahead of ourselves," said Ian Pollick, fixed income strategist
at RBC Capital Markets.	
    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.	
    The European news pushed the Canadian dollar to a
low of C$1.0023 against the greenback, or 99.77 U.S. cents, its
weakest since April 16.	
    It ended the session at C$0.9983 versus the U.S. dollar, or
$1.0017, down from Monday's finish at C$0.9930 versus the U.S.
dollar, or $1.0070.	
    "The Canadian dollar is lower because of increased risk
aversion and that entirely relates to European political
developments as the Greek election result continues to filter
through the market," said Fergal Smith, managing market
strategist at Action Economics.	
    Scotiabank's Sutton said she saw the near-term trading range
for Canada's dollar at C$0.9928-C$1.0023 against the greenback.	
    Surprising strong data on Canadian housing starts, led by a
surge in condominium construction, provided some support.
    But it wasn't enough to boost the broader mood. Toronto's
main stock index p lunged to its 2012 low on Tuesday, with mining
and energy shares among the big losers.	
    Canadian bond prices climbed and outperformed U.S.
Treasuries across the curve. 	
    Canada's 2-year bond gained 9 Canadian cents to
yield 1.228 percent, while the benchmark 10-year bond
 was up 39 Canadian cents to yield 1.979 p ercent.