* Rebounds from overnight weakness
* Analysts still see downward pressure
* Bonds weaken broadly with equity rally
TORONTO, March 4 (Reuters) - The Canadian dollar climbed against the U.S. currency on Wednesday as risk appetite returned and oil prices rose.
The currency weakened overnight to as low as C$1.2968 to the U.S. dollar, or 77.11 U.S. cents, but gradually recovered on the prospect of more stimulus spending by China and firmer oil prices.
A senior Chinese economic planning official said China would increase spending in areas such as manufacturing and infrastructure, on top of the 4 trillion yuan ($585 billion) stimulus package unveiled in November. [ID:nBJC000263]
At 10:20 a.m. (1520 GMT), the Canadian dollar CAD= was at C$1.2850 to the U.S. dollar, or 77.82 U.S. cents, up from C$1.2911 to the U.S. dollar, or 77.45 U.S. cents, at Tuesday's close.
"The directional bias in currencies, including Canada, has been led by a better bid to global risk," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
The Canadian dollar, which has also been heavily influenced by movements on stock markets recently, found support from a global rally by equities.
There was no domestic news to drive the currency and the Canadian dollar could now turn to global equities or U.S. data for direction.
A drop through the level of C$1.30 to the U.S. dollar has not come about so far, but several moves in that direction have been made this week. A significant break through this level could set up the Canadian dollar to hit lows not seen since 2004.
Although the Canadian dollar strengthened on Wednesday, there are still risks that could quickly pull it back.
The currency had hit a three-month low on Tuesday after the Bank of Canada cut interest rates to a record low. Central banks are still in focus with the European Central Bank and the Bank of England both expected to cut rates on Thursday.
Another risk for currencies this week includes the U.S. employment data on Friday, which is expected to show the economy lost 648,000 jobs in February and the unemployment rate rose to 7.9 percent from 7.6 percent.
Market players got a sense of the jobs picture in the U.S. private sector after ADP Employer Services said job losses accelerated in February and was worse than economists' expectations. [ID:nN04472262]
"We'd have to see some sustainable bids to equities over the course of days or even weeks before dollar/Canada ceases to make any attempt at C$1.30. It's still a magnet," said Spitz.
"I think that we may take another run at it, but it really will all depend on equities, the data, and events that we have coming up."
Canadian bond prices slid across the curve as North American stock markets extended the momentum from rebounding Asian and European stocks.
World stocks clambered back from multi-year lows as investors sought bargains after three days of steep losses brought on by deep fears for the world economy and financial system. [MKTS/GLOB]
The interest-rate sensitive two-year bond eased 5 Canadian cents to C$103.02 to yield 0.995 percent. The 10-year bond dropped 41 Canadian cents to C$106.32 to yield 3.026 percent.
The 30-year bond lost 80 Canadian cents to C$123.25 to yield 3.670 percent. (Reporting by Ka Yan Ng; editing by Rob Wilson)