* C$ firms to C$0.9679, or $1.0332
* Bonds fall as investors shed safe-haven assets
* US employment jumps in March, jobless rate falls (Updates with U.S. payrolls reaction, comment)
TORONTO, April 1 (Reuters) - The Canadian dollar rose to three-year highs against the U.S. currency on Friday morning after a strong U.S. jobs report underpinned hopes of an economic recovery.
The currency CAD=D4 touched its highest level since November 2007 at C$0.9643 to the U.S. dollar, or $1.0370, shortly after data showed U.S. nonfarm payrolls notched a second straight month of solid gains in March. A fall in the jobless rate to a two-year low of 8.8 percent also marked a decisive shift in the labor market that should help the economic recovery. [ID:nOAT004775]
Firm oil prices also supported the Canadian dollar.
At 9:20 a.m. (1320 GMT), the Canadian currency CAD=D4 stood at C$0.9645 to the U.S. dollar, or $1.0368, up from Thursday's close at C$0.9696 to the U.S. dollar, or $1.0314.
"The technicals still favor a higher Canada. I think it will be a slow grind higher based on the strong oil prices and prospects of global recovery, which will get more traction I think...because of the U.S. employment data," said Michael O'Neill, managing director at Knightsbridge Foreign Exchange.
"It was stronger than expected, but the market was looking for stronger than expected. The risk is then you don't get as big a move."
He said it was too early to tell if the break through the quadruple bottom of C$0.9680 was a move with conviction, putting the daily range between C$0.9640 and C$0.9720.
O'Neill said the Canadian dollar would also draw solid support from the price of oil, which was above $107 a barrel, trading around its highest since September 2008 as fighting in Libya, an OPEC producer, helped underpin the strength. [O/R]
Canadian bond prices slid across the curve, tracking U.S. Treasuries, after the higher-than-expected growth in U.S. payrolls and the fall in unemployment, bringing closer the day when U.S. interest rates may rise. Investors shed safe-haven assets for stocks and other riskier bets in response. [US/]
Canadian interest rate hike expectations also firmed slightly, with the odds of a September rate hike gaining following the U.S. data. Traders maintained bets that there is little chance the central bank will raise rates in April, according to a Reuters calculation of yields on overnight index swaps. Odds of a May hike were also seen as low. BOCWATCH
The two-year bond CA2YT=RR fell 7 Canadian cents to yield 1.867 percent, while the 10-year bond CA10YT=RR lost 17 Canadian cents to yield 3.371 percent. (Reporting by Ka Yan Ng; Editing by Leslie Adler)