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* C$ drops to C$0.9792 to the U.S. dollar, or $1.0212
* Bond prices rally as risk sentiment sours
* U.S. jobless claims add to bleak view of U.S. economy
TORONTO, June 23 (Reuters) - Canada's dollar extended losses against the U.S. currency on Thursday morning, as a rise in U.S. weekly jobless claims came on the heels of a bleaker U.S. economic growth forecast from the U.S. Federal Reserve.
The Canadian dollar sold off into the Wednesday's North American session end after reaching a one-week high, as the U.S. central bank gave no hint that it would offer more monetary support to the U.S. economy. It had also downgraded its view of the labor market. [ID:nN1E75K22F]
"There's just more momentum of that, driven by the rising jobless claims," said Mazen Issa, macro strategist at TD Securities, noting that new U.S. claims for unemployment benefits rose above the psychological level of 400,000.
Initial claims for state unemployment benefits climbed 9,000 to a seasonally adjusted 429,000, the U.S. government data showed. The prior week's figure was revised up to 420,000. Economists polled by Reuters had forecast claims to edge up to 415,000 from a previously reported count of 414,000. [ID:nN1E75M08F]
"Unless the economy really starts to show a material improvement on the labor market, I think the Canadian dollar is going to be very hesitant to grind higher," said Issa.
Further pressure on the Canadian dollar came on the back of a steep drop in the price of crude oil as the International Energy Agency said it would release crude from its strategic reserve. Canada is a net exporter of oil, and the currency often takes its cue from oil prices.
Risk sentiment was dented also by European Central Bank President Jean-Claude Trichet, who said the warning lights are flashing red on the euro zone's debt crisis. [ID:nLDE75M0C0]
Evidence of slower economic growth also hurt sentiment. Private sector activity slowed in China and Europe this month just as the outlook for the United States has darkened, according to data on Thursday. [ID:nLDE75M0UB]
Later in the session, Bank of Canada Deputy Governor John Murray will speak twice in Alberta, although he is largely expected to reiterate the central bank's message given on Wednesday when Governor Mark Carney appeared before a Senate committee.
The governor said the country's economic growth is expected to slow. He also joined the government in calling for a "firewall" around Greece to ensure its debt crisis does not spill over to infect the global financial system. [ID:nN1E75L1WZ]
At 9:15 a.m. (1315 GMT), the Canadian dollar was at C$0.9792 to the U.S. dollar, or $1.0212, down from C$0.9726 to the U.S. dollar, or $1.0282, at Wednesday's finish of C$0.9724 to the U.S. dollar, or $1.0284.
Canadian government bond prices rallied as risk sentiment soured. The two-year bond CA2YT=RR gained 9 Canadian cents to yield 1.469 percent, while the 10-year bond CA10YT=RR climbed 49 Canadian cents to yield 2.922 percent. (Reporting by Ka Yan Ng, Editing by Chizu Nomiyama)