CANADA FX DEBT-C$ stabilizes from 4-month low

* C$ holds ground at C$1.0251 vs US$, or 97.55 U.S. cents
    * Bond prices drift higher amid Europe worries

    By Claire Sibonney	
    TORONTO, May 24 (Reuters) - The Canadian dollar steadied on
Thursday after touching its weakest level in more than four
months in the previous session, though investors continued to
worry about a worsening debt crisis in Europe. 	
    The euro hit a 22-month low and safe-haven German bonds
achieved record low yields, after data showed Europe's economic
outlook deteriorating as business confidence is undercut by talk
of a Greek exit and slow progress in tackling the debt crisis.	
    "Unfortunately the trend is still (unchanged). I think risk
aversion is still the go-to trade at the moment," said Dean
Popplewell, chief currency strategist at OANDA.	
    "There's very good demand for U.S. dollars on any Canadian
rally at the moment."	
    The dollar index climbed to a 20-month high on
    "I think Canada has certainly overextended itself...what
tends to happen in this Canadian trading environment is that it
does take a breather, more so than other currencies,
specifically because of its economic ties to the U.S.," added
    At 8:03 a.m. (1203 GMT), the Canadian dollar, the 
currency stood at C$1.0251 versus the U.S. dollar, or 97.55 U.S.
cents, off slightly from Wednesday's close at C$1.0242 versus
the U.S. currency, or 97.64 U.S. cents.	
    Data that showed private-sector factory activity in China
also faltered in May as demand for exports fell also hit
investor sentiment, in a sign the impact of the euro zone crisis
could be undermining global economic recovery as Europe is
China's largest export market.	
    Traders will look to U.S. jobless claims and durable goods
data at 8:30 a.m. for further direction.	
    Popplewell said that beyond the Canadian dollar's Wednesday
low near C$1.03, the currency still stands to lose another cent
to cent and half in the near term.	
    Canadian bond prices ticked up, tracking U.S. Treasuries
higher on concerns over the health of the euro zone economy.
    Canada's two-year bond was up 1 Canadian cent to
yield 1.146 percent, while the benchmark 10-year bond
 rose 12 Canadian cents to yield 1.864 percent.