* Closes at C$1.0605 to the U.S. dollar
* Unravels Wednesday's 1.2 percent gain
* Bond prices tilt higher across curve (Updates to session close)
By Frank Pingue
TORONTO, Nov 26 (Reuters) - Canada's dollar tumbled against the greenback on Thursday as renewed risk aversion in the wake of debt worries in Dubai shook the domestic currency of all its meaty gains from the previous session.
The skid was triggered by news of debt problems in Dubai, which sparked widespread concern about the once-booming Gulf region's financial health and added to the general nervousness about the state of the world economy. [ID:nGEE5AP167]
Selling in the Canadian dollar followed a 1.2 percent rally during Wednesday's session when news that Russia's central bank said it wants to invest some of its reserves in the currency prompted a wave of buying.
"It's really risk-off today and certainly the Dubai news that broke yesterday seemed to gain a lot of traction overnight," said Steve Butler, director of foreign exchange trading at Scotia Capital.
"Everything that was good yesterday was bad today and so we saw a sharp drop in Canada and it's pretty disappointing after the Russian news yesterday."
The Canadian dollar closed at C$1.0605 to the U.S. dollar, or 94.30 U.S. cents, down from C$1.0455 to the U.S. dollar, or 95.65 U.S. cents, at Wednesday's close.
Around the midway point of the North American session, the Canadian dollar fell as low as C$1.0622 to the U.S. dollar, or 94.14 U.S. cents, its lowest level since Nov. 24.
Also weighing on the currency was the backdrop of gold prices that retreated from a record high hit earlier on Thursday and lower oil prices. [GOL/] [O/R] Both are key Canadian exports whose prices often influence the currency.
With many U.S. players booked off for the Thanksgiving holiday on Thursday, Butler said the Canadian dollar could start heading back down to the C$1.0700-50 level in the near term.
BOND PRICES EDGE HIGHER
Canadian bonds ended slightly higher across the curve as the debt concerns out of Dubai prompted investors to flee equities in favor of more secure assets like government debt.
The S&P/TSX composite index <.GSPTSE> shed 1.72 percent in the latest session.
The two-year Canadian government bond
The Canadian 10-year bond yield was 6.10 basis point below
its U.S. counterpart, compared with 1.10 basis points below on
Wednesday.
((frank.pingue@thomsonreuters.com ; +1 416 941-8094; Reuters
Messaging: frank.pingue.reuters.com@reuters.net))
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