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TORONTO (Reuters) - The Canadian dollar climbed against the U.S. currency on Thursday as upbeat U.S. labor market data spurred investor optimism the world's top economy was slowly mending.
The U.S. data showed new claims for unemployment benefits held at their lowest level since the early days of the 2008-09 recession.
"The continued improvement in the trend in initial claims is helping the mood a little bit today," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets.
"You're seeing broad U.S. dollar weakness across the board so there's a somewhat risk-on environment with stocks modestly higher. That's of course helping the Canadian dollar," Reitzes, said.
The Canadian dollar finished at C$0.9976 against its U.S. counterpart, or $1.0024, up from Wednesday's North American close at C$1.0004 versus the U.S. dollar, or 99.96 U.S. cents.
Adding to the market mood was upbeat German data, which helped the euro rise against the U.S. dollar and eased concerns somewhat about a bleak economic outlook for the euro zone. The price of oil, a key Canadian export, also lit a fire under the Canadian currency. <MKTS/GLOB> <O/R>
However, markets remained wary about possible problems implementing Greece's bailout plans. As well, broader concerns over the economy were also borne out by European Commission forecasts showing the euro zone would contract this year.
"The European developments themselves speak to a positive and a negative reaction in the currency space. We've seen a better than expected German Ifo, which gave the euro a bid to a new calendar high and some of that optimism pulled back on the downsized forecasts coming from the EU," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"The fundamentals continue to speak to an erratic global environment."
Spitz said intraday support and resistance for the U.S. dollar against Canada's should be seen at C$0.9940 and C$1.0020 with the 200-day moving average at C$0.9980, the pivot point for relative optimism or pessimism from a closing perspective.
Canadian bond prices were largely flat to higher across the curve, reflecting underlying market uncertainty despite the modest risk appetite. <US/>
"Bonds just don't believe people should be as optimistic as they are. There are still issues in Europe. That hasn't gone away," said Reitzes.
The two-year bond was 2 Canadian cents higher to yield 1.089 percent. The 10-year bond was up 3 Canadian cents to yield 2.052 percent.
Additional reporting by Claire Sibonney; editing by Rob Wilson