* C$ at C$1.0234 vs US$, or 97.71 U.S. cents * China rate cut boosts growth currencies * Spanish bond auction eases euro zone debt fears * Bond prices mostly lower By Jon Cook TORONTO, June 7 (Reuters) - Canada's dollar advanced against its U.S. counterpart on Thursday as global slowdown fears eased after China's central bank cut interest rates, European policymakers appeared poised to rescue Spanish banks and expectations rose that the U.S. Federal Reserve would embark on more stimulus measures. China's central bank cut benchmark interest rates by 25 basis points in a surprise move on Thursday to shore up slackening economic growth, its first rate cut since the depths of the 2008/09 financial crisis. The move by China was a boost for the growth-linked currencies in Canada, New Zealand and Australia, said Chris Applin, senior dealer at Canadian Forex in London. The Australian dollar climbed to a fresh three-week high of US$0.9993. The Canadian dollar reached a session high of C$1.0226 against the greenback, or 97.79 U.S. cents, its strongest since May 30. "That's given the commodity currencies a bit of a lift this morning," said Applin. "Central banks are willing to ease in these kinds of times as they appreciate that conditions are far from ideal." After surging to its biggest single-day gain in more than six months on Wednesday, the Canadian dollar extended gains on Thursday. At 8:26 a.m. (1226 GMT), the Canadian currency was at C$1.0234 versus the U.S. dollar, or 97.71 U.S. cents, up from Wednesday's close at C$1.0279 against the U.S. dollar, or 97.29 U.S. cents. News in Europe was also upbeat, as Spain soothed fears on Thursday that it is being cut off from financial markets by raising more than 2 billion euros ($2.5 billion) at a bond auction, although it had to pay dearly. The auction followed a report on Wednesday that German and European Union officials were urgently looking at how to pump cash into Spanish banks crippled by the collapse of a real estate bubble without forcing Madrid to submit its government finances to international strictures. Since last week's U.S. job data, there has been rising speculation of more stimulus measures from global central banks, though the European Central Bank had dashed hopes that it would take any near-term action on Wednesday. The Bank of Canada held rates at 1 percent on Tuesday but the tone from its statement signaled that its next move would be a rate hike. Currency traders were looking ahead to what Fed Chairman Ben Bernanke will say in testimony to a congressional committee on Thursday for any further signals of another round of quantitative easing. Hopes of more stimulus were offset somewhat by positive U.S. data on Thursday, as the number of Americans lining up for new jobless benefits fell last week for the first time since April. "What Bernanke says is going to be key," said Applin. "Growth prospects in the U.S. are obviously key for Canada and the prospect of QE3 is not particularly good for the U.S. dollar and since yesterday the (U.S.) dollar has been sold off on that basis." Applin said the Canadian dollar was likely to stay within a range between C$1.0250 and C$1.0350 for the next 24 hours. Canadian bond prices were mostly lower. The two-year bond fell 3 Canadian cents to yield 1.066 percent, while the benchmark 10-year bond dropped 3 Canadian cents to yield 1.812 percent.