CANADA FX DEBT-U.S. data helps fuel C$ rally

* C$ climbs to high of $1.0020, strongest since May
    * Payrolls data tops expectations; unemployment ticks up
    * Currency trades near recent record high against euro
    * Bond prices lower across curve

    By Jennifer Kwan
    TORONTO, Aug 3 (Reuters) - Canada's dollar traded at a
stronger level than the U.S. currency on Friday for the first
time in more than 2 months as investors welcomed a U.S. jobs
report that offered signs that the economy there is improving.
    The currency climbed to a high of C$0.9980 to the
greenback, or $1.0020, its strongest level since May 11, after
the U.S. data.
    Nonfarm payrolls rose 163,000 last month, beating
economists' expectations for a 100,000 gain. The report was
dimmed somewhat, however, by the increase in the jobless rate to
8.3 percent from 8.2 percent in June, even as more people gave
up the search for work. 
    Still, the stronger-than-expected jobs growth suggested the
economy of Canada's largest trading partner continues to expand.
    "The argument behind the move today is much more fundamental
in that if the U.S. economy is picking up jobs at a decent pace
then ultimately it's going to reflect itself in a stronger
economy, which is being priced into equity valuations," said    
Jack Spitz, managing director of foreign exchange at National
Financial Bank, noting the rally in global stock markets.
    At 12:30 p.m. (1630 GMT), the Canadian dollar was at
C$0.9983 against the greenback, or $1.0017, higher than
Thursday's North American finish at C$1.0072, or 99.29 U.S.
    At the same time, some think the higher jobless rate could
also still pressure the U.S. Federal Reserve to try to boost the
economy with a third round of bond purchases.
    "That's got investors thinking we'll see the Fed stepping in
later in the year to provide stimulus, so that's increasing risk
appetite and weakening the U.S. dollar across the board," said
Darren Richardson, a senior corporate dealer at CanadianForex.
    The Fed this week stopped short of offering new monetary
stimulus even as it signaled further bond buys could be in
    The Canadian dollar traded at C$1.2367, near record high
levels of C$1.2189 against the euro, or 82.04 euro
cents, which it hit on Thursday.
    "Even though the ECB didn't really change their stance
yesterday, the market is still clinging to the hope of the ECB
taking action, combined with the Fed later in the year," said
    "As always, if we do see unexpected negative data coming
form the peripheral economies we'll see the U.S. dollar rebound
immediately as risk comes off.
    "It really is a day-to-day testing of risk sentiment."
    Investor appetite for risk helped push up U.S. stocks 
 by 2 percent, while U.S. oil prices surged more
than 4 percent on Friday after the jobs report.
    The U.S. dollar and euro rose, while the safe-haven yen
dropped more than 1 percent against the euro, Australian,
Canadian and New Zealand dollars. 
    Canada's two-year bond retreated 12 Canadian
cents to yield 1.124 percent, and the benchmark 10-year bond
 dropped 97 Canadian cents to yield 1.776 percent.