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* C$ retreats to 94.77 U.S. cents
* Bonds prices fall
* Markets cautious ahead of Friday's U.S. jobs report
TORONTO, Sept 3 (Reuters) - Canada's dollar held softer versus the U.S. currency, while bond prices were also lower, as caution prevailed ahead of the looming U.S. monthly jobs report on Friday.
Investors are focused on August's non-farm payrolls report at 8:30 a.m. (1230 GMT) to signal whether the U.S. economy is on a firmer road to recovery, following several pieces of optimistic manufacturing globally that tempered sentiment of an imminent new recession.
The U.S. monthly jobs report is expected to show a third straight decline in payrolls overall, with 100,000 jobs lost, but an increase of 41,000 in private payrolls, according to a Reuters poll. The U.S. jobless rate was forecast to edge up to 9.6 percent from 9.5 percent in the prior month.
A combination of factors, including a reluctance by firms to add staff, relentless layoffs at cash-strapped state and local governments, and the fading boost from U.S. Census Bureau hiring, is expected to be a drag in the data. [ID:nN31235915]
"It's going to be one of those things where the headline number is going to be ugly. It's baked in the cake a loss of jobs due to the laid off census workers. The big question is ex-census what kind of figure do we get," said Michael Gregory, senior economist at BMO Capital Markets.
"I think we'll come away with the expectation...that the weak job market is getting a little bit weaker."
At 8:00 a.m. (1200 GMT), the Canadian dollar CAD=D4 was slightly weaker at C$1.0552 to the U.S. dollar, or 94.77 U.S. cents, compared with Thursday's North American close at C$1.0535 to the U.S. dollar, or 94.92 U.S. cents.
Canada's two-year bond CA2YT=RR dipped 3 Canadian cents to yield 1.300 percent, while the 10-year issue CA10YT=RR fell 12 Canadian cents to yield 2.883 percent.
The jobs figures will also feed into Canada's interest rate expectations as a sputtering U.S. economy is a top concern, given the two countries' close trading relationship. Sustained weakness in the United States is seen spilling over to Canada's economy.
The Bank of Canada decides on interest rates next week on Sept. 8 and is one of the closest calls in some time. BOCWATCH [CA/POLL]
(Reporting by Ka Yan Ng; Editing by Chizu Nomiyama)