CANADA FX DEBT-C$ tumbles on risk aversion, Goldman charges

* Touches low of C$1.0165 to the US$, or 98.38 U.S. cents

* Markets rattled as Goldman Sachs charged with fraud

* Canada's February factory sales below estimates

* Investors await Bank of Canada for direction

* Bonds prices move higher across curve (Recasts; adds quotes, details about Goldman Sachs)

By Jennifer Kwan

TORONTO, April 16 (Reuters) - The Canadian dollar tumbled more than a cent against the U.S. currency on Friday as global stocks plummeted on increased risk aversion after regulators charged U.S. investment bank Goldman Sachs with fraud.

The currency fell to a low of C$1.0165 to the U.S. dollar, or 98.38 U.S. cents as investors scampered to safer assets on news the U.S. Securities and Exchange Commission had charged Goldman Sachs with fraud in the structuring and marketing of a debt product tied to subprime mortgages. [ID:nN16121493]

"It's the general market market meltdown that happened after the Goldman Sachs news hit. That seems to be the prime driver that has pushed equities lower, and commodities have dropped with it," said Sacha Tihanyi, currency Strategist at Scotia Capital.

"Nobody knows if this is the start of something or what could happen. Markets don't like uncertainty. That's a fairly big dose of it," he added.

"It's risk aversion. It introduces uncertainty."

At 1:01 p.m. (1701 GMT), the Canadian dollar was at C$1.0148 to the U.S. dollar, or 98.54 U.S. cents, up slightly from earlier lows. On Thursday, it finished at C$1.0033 to the U.S. dollar, or 99.67 U.S. cents.

Also weighing on sentiment were disappointing earnings from Google Inc , while the euro dropped on worries about Greece's debt crisis. [MKTS/GLOB]

The U.S. dollar and yen advanced strongly on Friday on rising risk aversion. [FRX/]

The Canadian currency had already begun its steeper descent after data showed domestic manufacturing sales edged less than expected in February, gaining just up 0.1 percent.

Analysts surveyed by Reuters had forecast a 0.8 percent increase in factory sales in the month. [ID:nN16446129]

Still, the manufacturing sales report reflected a broader trend of recovery, said Millan Mulraine, an economic strategist at TD Securities.

"Overall, despite the disappointing headline print in February, the rebound in Canadian manufacturing sector activity has been nothing short of spectacular, and it is an indication that the Canadian economy has continued to be a net beneficiary from the recovery in global demand," he said.

However, Mulraine noted the impact of the high-flying Canadian dollar could become a key source of drag on activity in the longer term.

The price of oil slid in tandem with equity market, while gold prices were also down. [O/R] [GOL/]

Before the Goldman news, market watchers had expected the Canadian dollar to drift ahead of a Bank of Canada meeting next week. The market is looking for clues on the timing of an increase in the key interest rate from its 0.25 percent level.

Most of Canada's primary securities dealers predicted on Thursday that the bank would raise interest rates in July as the high-flying Canadian dollar gives it some wiggle room even as the economy picks up steam. [ID:nN15207373]

BONDS EDGE HIGHER

Canadian bond prices rose across the curve, as money drained out of equity markets and flowed into the safer haven of bonds. [US/]

"It's a very correlated move," said Scotia Capital's Tihanyi.

The two-year government bond rose 8 Canadian cents to C$99.28 to yield 1.896 percent, while the 10-year bond gained 20 Canadian cents to C$100.43 to yield 3.694 percent. (Editing by Rob Wilson)