CANADA FX DEBT-C$, bond prices hold lower ahead of U.S. jobs

   * C$ retreats to 94.77 U.S. cents

 * Bonds prices fall

 * Markets cautious ahead of Friday's U.S. jobs report

 TORONTO, Sept 3 (Reuters) - Canada's dollar held softer
versus the U.S. currency, while bond prices were also lower, as
caution prevailed ahead of the looming U.S. monthly jobs report
on Friday.

 Investors are focused on August's non-farm payrolls report
at 8:30 a.m. (1230 GMT) to signal whether the U.S. economy is
on a firmer road to recovery, following several pieces of
optimistic manufacturing globally that tempered sentiment of an
imminent new recession.

 The U.S. monthly jobs report is expected to show a third
straight decline in payrolls overall, with 100,000 jobs lost,
but an increase of 41,000 in private payrolls, according to a
Reuters poll. The U.S. jobless rate was forecast to edge up to
9.6 percent from 9.5 percent in the prior month.

 A combination of factors, including a reluctance by firms
to add staff, relentless layoffs at cash-strapped state and
local governments, and the fading boost from U.S. Census Bureau
hiring, is expected to be a drag in the data. [ID:nN31235915]

 "It's going to be one of those things where the headline
number is going to be ugly. It's baked in the cake a loss of
jobs due to the laid off census workers. The big question is
ex-census what kind of figure do we get," said Michael Gregory,
senior economist at BMO Capital Markets.

 "I think we'll come away with the expectation...that the
weak job market is getting a little bit weaker."

 At 8:00 a.m. (1200 GMT), the Canadian dollar CAD=D4 was
slightly weaker at C$1.0552 to the U.S. dollar, or 94.77 U.S.
cents, compared with Thursday's North American close at
C$1.0535 to the U.S. dollar, or 94.92 U.S. cents.

 Canada's two-year bond CA2YT=RR dipped 3 Canadian cents
to yield 1.300 percent, while the 10-year issue CA10YT=RR
fell 12 Canadian cents to yield 2.883 percent.

 The jobs figures will also feed into Canada's interest rate
expectations as a sputtering U.S. economy is a top concern,
given the two countries' close trading relationship. Sustained
weakness in the United States is seen spilling over to Canada's
economy.

 The Bank of Canada decides on interest rates next week on
Sept. 8 and is one of the closest calls in some time.
BOCWATCH [CA/POLL]

 (Reporting by Ka Yan Ng; Editing by Chizu Nomiyama)