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* C$ reverses losses, catches up with riskier currencies
* Risk appetite returning on stimulus hopes
* Canada Jan employment -129K, worst job loss on record (Updates to midafternoon)
By Ka Yan Ng
TORONTO, Feb 6 (Reuters) - Canada's dollar reversed course and turned high versus the U.S. currency at midafternoon on Friday as risk appetite returned, overturning fallout from domestic jobs numbers that were the worst on record.
At 2:45 p.m. (1945 GMT), the Canadian currency was at C$1.2260 to the U.S. dollar, or 81.57 U.S. cents, up from C$1.2310 to the U.S. dollar, or 81.23 U.S. cents, at Thursday's close.
Earlier, the currency had slumped to a two-week low of C$1.2540, or 79.74 U.S. cents, touched after Statistics Canada said the country suffered its worst job losses in over three decades in January.
But there was no momentum behind the move beyond C$1.25 analysts said, partly because risk appetite was making a comeback, lifting stocks, as the worst U.S. unemployment data in decades boosted political pressure for a economic stimulus deal to be passed.
"If we can't make a new low for the Canadian dollar on the back of the worst employment numbers in history, it suggests to me that the Canadian dollar isn't going to fall that much more at the moment," said Shaun Osborne, chief currency strategist at TD Securities.
"Risk appetite is increasing as the markets speculate on the prospects of stimulus measures coming out of the U.S. and other measures to help free up credit."
A Statistics Canada report showed the recession forced employers to cut a record 129,000 workers and pushed the unemployment rate to 7.2 percent from 6.6 percent in December.
Other high yielding currencies, such as the Australian and New Zealand dollars, also rose. (Editing by Jeffrey Hodgson)