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* C$ C$1.0166 vs US$, or 98.37 U.S. cents * U.S. jobless claims rose sharply; new home starts tumbled in April * U.S. inflation points to softer demand in economy * Canadian CPI data on Friday in focus * Bond prices higher across the curve By Solarina Ho TORONTO, May 16 (Reuters) - The Canadian dollar strengthened marginally against its U.S. counterpart in early trade on Thursday, following a batch of weaker-than-expected U.S. data that raises questions about the economic recovery of Canada's largest trading partner. U.S. jobless claims rose sharply last week, a sign of a weaker labor market, while ground-breaking at home construction sites tumbled in April and a gauge of underlying inflation pointed to weak demand. The U.S. economy has shown signs that growth slowed late in the first quarter and in April as Washington's push to trim the budget deficit weighed on consumers and businesses. "The market is not really focused on what's going on in Canada right now," said Greg Moore, currency strategist at TD Securities. "Essentially it's all about the U.S." Despite the softer-than-forecast data, Moore said compared to some of its peers, the United States is still a growth story and the Canadian economy is seen benefiting more so than other economies from overall U.S. strength. The loonie has underperformed the greenback for most of this week, as the U.S. currency has been bid on across the range of major currencies. At 9:58 a.m. (1340 GMT) the Canadian dollar was trading at C$1.0166 to the greenback, or 98.37 U.S. cents, compared with C$1.0172, or 98.31 U.S. cents, at Wednesday's North American close. Earlier, the currency had weakened to C$1.0208, or 97.96 U.S. cents. The currency was seen trading between the mid to upper C$1.02's and the mid C$1.01's, said Moore. The Canadian dollar was broadly weaker against most of its currency peers, though it was stronger against its commodity counterparts, the Australian and New Zealand dollars. It touched its strongest level against the Aussie since October, 2012 and its strongest level against the Kiwi since early February, 2013. Friday's Canadian inflation data will be the domestic highlight for this week. Economists polled by Reuters are expecting no growth for the month of April. "It fits in with global story as well that you're seeing all kinds of inflation measures in developed economies all over the world disappoint, or below what anybody had been expecting," said Moore. The two-year bond was up 1.9 Canadian cent to yield 1.018 percent, while the benchmark 10-year bond rose 17 Canadian cents to yield 1.905 percent.