* C$ at C$1.0169 to US$, or 98.34 U.S. cents * Bets being placed on earlier Bank of Canada rate hike * Investors wary over central banks' withdrawal of stimulus By Alastair Sharp TORONTO, June 12 The Canadian dollar strengthened against its U.S. counterpart in early trade on Wednesday, even as the greenback clawed back steep losses from the previous day, as traders eyed a shorter time frame before a Bank of Canada interest rate hike. Globally, investors are still jittery over signals from central banks, in particular the U.S. Federal Reserve and the Bank of Japan, that monetary stimulus programs may be scaled back. But while those fears pressure stocks, bonds and currencies, the underlying economic recovery in the United States, that will allow such a slowing of stimulus, is broadly positive for the Canadian dollar. "There is a positive implication from the U.S. recovery getting a bit more traction, but I think the proof will have to be in the pudding for Canadian data," said Greg Moore, a currency strategist at TD Securities. Canada produced a blockbuster jobs report last Friday which also supported ideas that the Bank of Canada may move more quickly than expected to hike its benchmark rate, in turn helping the Canadian currency. Overnight index swaps, which trade based on expectations for the central bank's key policy rate, have risen recently as decent data led some investors to bet on a rate hike sooner than previously expected. A Reuters poll on May 23 showed most economists don't expect the Bank of Canada to hike rates until the fourth quarter of 2014 due to tepid economic growth and low inflation. TD's Moore warned against reading too much into the strong showing from Friday's jobs report, which has historically swung erratically and has a wide margin of error. "It is risky to put so much weight in such a volatile data series," he said. At 9:39 a.m. EDT (1339 GMT) the Canadian dollar was trading at C$1.0169 to the greenback, or 98.34 U.S. cents, compared with C$1.0189, or 98.15 U.S. cents, at Tuesday's North American close. Moore said the loonie, as Canada's currency is colloquially known, had broken a key level in the upper C$1.01 region and would now be looking to test a retracement at C$1.0080. But he warned the currency could also pop back up to C$1.03 in a matter of days if the U.S. Fed signals that the stimulus spigot will be tightened sooner. Prices for Canadian government debt fell across the curve. The two-year bond was off 2 Canadian cents to yield 1.161 percent, while the benchmark 10-year bond fell 24 Canadian cents to yield 2.205 percent.