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TORONTO (Reuters) - The Canadian dollar was flat against its U.S. counterpart on Thursday as optimism over a deal to avert fiscal calamity in the United States gave way to concerns about issues that Washington has yet to resolve.
The Canadian currency had strengthened sharply on Wednesday after the fiscal deal was reached, but looming battles over spending cuts and debt limits curtailed the celebration.
"With the lack of bipartisan support as far as politics generally on Capitol Hill, we know we're going to have another relatively fraught period with the debt ceiling and spending scenarios coming around quickly," said Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London.
"That's going to be one factor that will mitigate a strong risk-on move being perpetuated."
At 9:28 a.m. (1428 GMT) the Canadian dollar was trading at C$0.9850 to the greenback, or $1.0152, compared with C$0.9852, or $1.0150, at Wednesday's North American close.
Stretch said the Canadian dollar would find it difficult to break past C$0.9840 in the short term.
U.S. jobless claims rose last week and a private sector U.S. employment report pointed to growth in the labor market ahead of a key government reading due on Friday.
Canadian employment figures for December will also be released on Friday.
Prices for Canadian government debt were lower across the curve, with the two-year bond off half a Canadian cent to yield 1.172 percent, while the benchmark 10-year bond fell 42 Canadian cents to yield 2.409 percent.
Editing by Bernadette Baum