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* C$ higher at 96.22 U.S. cents
* U.S. weekly jobless data aids C$ higher
* Risk appetite pushes bonds lower across curve (Adds details, quote)
By Jennifer Kwan
TORONTO, July 8 (Reuters) - The Canadian dollar climbed against the greenback on Thursday after data showed a sharp drop in U.S. weekly jobless claims, easing concerns about the economic health of Canada's largest export market.
The Canadian dollar CAD=D4 touched a session high of C$1.0379 to the U.S. dollar, or 96.35 U.S. cents, its strongest level since June 29, following the data.
U.S. government data showed initial claims for state unemployment benefits dropped 21,000 to a seasonally adjusted 454,000 in the week ended July 3, the lowest level since early May. Analysts polled by Reuters had expected claims to fall to 460,000. [ID:nN07157763]
"The headline data implies a slightly better outlook for the U.S. economy," said Shaun Osborne, chief currency strategist at TD Securities.
Osborne also cited a broader risk rally supported by robust global equity markets as a key factor boosting the currency.
"The Canadian dollar is still benefiting from the slightly better risk environment that we're seeing at the moment," he said.
At 9:48 a.m. (1348 GMT), the Canadian dollar CAD=D4 was at C$1.0393 to the U.S. dollar, or 96.22 U.S. cents, up from Wednesday's finish at C$1.0478 to the U.S. dollar, or 95.44 U.S. cents.
The Canadian dollar had already been climbing early on Thursday after the International Monetary Fund upgraded its 2010 global growth forecast and strong Australian jobs data boosted higher-risk currencies. [ID:nTOE666034] [FRX/]
"It's the ongoing gravitation towards risk-seeking trades, that's the key driver," said Michael O'Neill, managing director at Knightsbridge Foreign Exchange.
"The whole investor mood, which is very fickle, is a little more upbeat this week than it was last week."
World stocks, another proxy of risk appetite, gained on rising expectations the forthcoming U.S. corporate earnings season would show strong performance, while oil rose above $75 a barrel. [MKTS/GLOB] [O/R]
O'Neill said the short-term Canadian technical picture was bullish. He said the break below C$1.0475 will target C$1.0344 and then C$1.0250.
On the domestic front, data showed the price of new homes in Canada rose 0.3 percent in May for the third straight month, as expected. [ID:nN08203226] The focus is on Friday's critical Canadian employment report, which O'Neill said could lead to position-squaring later in the day.
With "risk-on" in play, Canadian government bond prices were mostly lower.
The two-year government bond CA2YT=RR sagged 6 Canadian cents to yield 1.665 percent, while the 10-year bond CA10YT=RR was fell 33 Canadian cents to yield 3.212 percent. (Additional reporting by Claire Sibonney; Editing by Jeffrey Hodgson)