* C$ at C$0.9962 vs US$, or $1.0038
* Gets support from stronger-than-expected European data
* Political uncertainty in Spain, Italy still weighs
* C$ strongest against yen since mid-2010
By Alastair Sharp
TORONTO, Feb 5 (Reuters) - Canada's dollar gained against
its U.S. counterpart on Tuesday, helped by better-than-expected
euro zone and U.S. economic data, but the currency remained
under pressure as political uncertainty in Spain and Italy
weighed.
Traders were also looking ahead to Canadian employment data
due at the end of the week and testimony from departing Bank of
Canada chief Mark Carney to a British parliamentary committee on
Thursday.
"We'll get a typical knee-jerk reaction if it (Friday's jobs
data) is weaker, and if we see another outlier to the topside
we'll probably see dollar-Canada trend down to the low 99s or
high 98s," said Matt Perrier, managing director of foreign
exchange sales at BMO Capital Markets.
The currency changed hands at C$0.9962 to the U.S.
dollar, or $1.0038, at the end of Tuesday's North American
session, compared with Monday's close of C$0.9986, or $1.0014.
The Canadian dollar rose after a survey showed business
optimism in the euro zone at an eight-month high.
Meanwhile, the vast U.S. services sector expanded, although
the pace slowed. The U.S. market is the biggest destination for
Canadian exports.
Still, perceived weakness or political uncertainty in either
region could weaken the Canadian currency through the
one-for-one level with the greenback, said Don Mikolich,
executive director of foreign exchange sales at CIBC.
"It has people thinking that we could see a retest above
par. The C$1.0050 area had been the previous high. I think
that's a potential target over the next little bit," Mikolich
said.
The Canadian dollar did better against other major
currencies on Tuesday, hitting its strongest level against the
yen since mid-2010, as some Japanese companies stepped
up hedging against further weakness on expectations of more
aggressive easing by the Bank of Japan.
It also firmed to C$1.3441 against the euro, its strongest
level since Jan. 25.
Canadian government bond prices fell across the curve, with
the two-year Canadian government bond easing 4
Canadian cents to yield 1.176 percent, and the benchmark 10-year
bond sliding 42 Canadian cents to yield 2.033
percent.