* C$ at C$0.9812 vs US$, or $1.0192
* C$ touched one-week low, but support seen
* U.S. payrolls flat in August, well below expectations
* Bonds push higher across curve; yields near August lows (Adds details, comments)
By Andrea Hopkins
TORONTO, Sept 2 The Canadian dollar sank to a one-week low against the greenback on Thursday morning after the U.S. jobs report for August came in far weaker than expected, reigniting fears about a global growth slowdown and sending investors to safe-haven assets.
The U.S. dollar also weakened against key currencies such as the yen and Swiss franc [FRX] after news that U.S. employers hired no new workers last month, against expectations for a 75,000 increase in payrolls. That sent government bond prices higher and pushed stock markets into a global slump. [MKTS/GLOB]
Canada's dollar fell against all major currencies on concern about the country's link to the U.S. economy. The United States is by far Canada's largest trading partner.
"Overall it's a weak U.S. dollar story," said Camilla Sutton, chief currency strategist at Scotia Capital.
"The impact for the Canadian dollar is a little bit mixed up because we're so closely tied to the U.S. economy. It likely means the Canadian dollar underperforms on the crosses, but all in all I think we'll have a brief spike in risk aversion just because a weaker U.S. economy threatens the global economy."
The Canadian dollar slid as low as C$0.9846 against the U.S. dollar, or $1.0180, in early trade, its lowest point since Aug. 26, and then recovered slightly.
At 10:55 a.m. (1455 GMT) the Canadian dollar CAD=D4 was at C$0.9812 to the U.S. dollar, or $1.0192, down from Thursday's session close of C$0.9755 to the U.S. dollar, or $1.0251.
Shane Enright, executive director of foreign exchange sales at CIBC World Markets, said the Canadian dollar was getting some support around C$0.9850, and would likely trade in a range of C$0.9810 and C$0.9850 for the rest of session, taking direction from U.S. stock markets.
"It's going to be a function of how far the equities run here and if we can find any support there. The Dow is down over 200 points, and trying to rally here," Enright said.
"But I think if we don't see a significant slide in the equities we may just sit between C$0.9810 and C$0.9850 for the balance of the day."
Volume is expected to thin dramatically after European markets close and U.S. and Canadian investors head into a long weekend. U.S. and Canadian markets are closed on Monday for Labor Day, and bond markets will close early on Friday in both New York and Toronto.
The U.S. Labor Department said nonfarm payrolls were unchanged in August, the weakest reading since September 2010, and nonfarm employment for June and July was revised to show 58,000 fewer jobs. [ID:nOAT004865]
The grim employment news will likely keep pressure on the U.S. Federal Reserve to provide more monetary stimulus to aid the economy.
"The weakness in the overall U.S. employment situation ... likely raises speculation that the (Fed) will step in with another round of asset purchases later this fall," Sutton said.
Canadian government bond prices pushed higher across the board, alongside U.S. Treasuries, with many investors anticipating further signs of economic weakness. [US/]
The two-year bond CA2YT=RR rose 9 Canadian cents to yield 0.95 percent, while the 10-year bond CA10YT=RR gained 78 Canadian cents to yield 2.309 percent.
Yields across the curve were near many of the multi-decade lows reached last month. (Editing by Jeffrey Hodgson and Peter Galloway)