* C$ at C$0.9962 vs US$, or $1.0038 * Gets support from stronger-than-expected European data * Political uncertainty in Spain, Italy still weighs * C$ strongest against yen since mid-2010 By Alastair Sharp TORONTO, Feb 5 (Reuters) - Canada's dollar gained against its U.S. counterpart on Tuesday, helped by better-than-expected euro zone and U.S. economic data, but the currency remained under pressure as political uncertainty in Spain and Italy weighed. Traders were also looking ahead to Canadian employment data due at the end of the week and testimony from departing Bank of Canada chief Mark Carney to a British parliamentary committee on Thursday. "We'll get a typical knee-jerk reaction if it (Friday's jobs data) is weaker, and if we see another outlier to the topside we'll probably see dollar-Canada trend down to the low 99s or high 98s," said Matt Perrier, managing director of foreign exchange sales at BMO Capital Markets. The currency changed hands at C$0.9962 to the U.S. dollar, or $1.0038, at the end of Tuesday's North American session, compared with Monday's close of C$0.9986, or $1.0014. The Canadian dollar rose after a survey showed business optimism in the euro zone at an eight-month high. Meanwhile, the vast U.S. services sector expanded, although the pace slowed. The U.S. market is the biggest destination for Canadian exports. Still, perceived weakness or political uncertainty in either region could weaken the Canadian currency through the one-for-one level with the greenback, said Don Mikolich, executive director of foreign exchange sales at CIBC. "It has people thinking that we could see a retest above par. The C$1.0050 area had been the previous high. I think that's a potential target over the next little bit," Mikolich said. The Canadian dollar did better against other major currencies on Tuesday, hitting its strongest level against the yen since mid-2010, as some Japanese companies stepped up hedging against further weakness on expectations of more aggressive easing by the Bank of Japan. It also firmed to C$1.3441 against the euro, its strongest level since Jan. 25. Canadian government bond prices fell across the curve, with the two-year Canadian government bond easing 4 Canadian cents to yield 1.176 percent, and the benchmark 10-year bond sliding 42 Canadian cents to yield 2.033 percent.