* C$ off lows, rebounds to C$0.9777 vs US$, or $1.0228
* Earlier touched weakest level vs US$ since March 21
* Bond prices pare gains after ISM data (Updates to afternoon, adds commentary)
TORONTO, June 3 (Reuters) - The Canadian dollar cut most of its early losses against the U.S. currency on Friday after investors latched on to a report showing a pickup in U.S. services sector growth following dismal jobs data.
Early U.S. jobs data sent the Canadian dollar to C$0.9852, or $1.0150 -- its weakest level since March 21 -- compared to C$0.9782 to the U.S. dollar, or $1.0223, immediately before the release.
U.S. non-farm payrolls rose far less than expected in May, the worst reading since September. The jobless rate rose to 9.1 percent as high energy prices and the effects of Japan's earthquake bogged down the economy. [ID:nOAT004818]
But the report was partly offset by U.S. services sector data that grew modestly in May while gauges of new orders and employment climbed.
"The trends for the Canadian dollar are a little mixed," said Shaun Osborne, chief currency strategist at TD Securities.
"The Canadian dollar tends to underperform on the back of weaker-than-expected numbers and although the ISM on the margin was a little better than expected it doesn't really offset the big miss we had on the payrolls."
He noted the general run of both U.S. and Canadian economic data recently has been quite disappointing.
At 3:14 p.m. (1914 GMT), the currencywas at C$0.9777, or $1.0228, down from Thursday's North American session close at C$0.9756 to the U.S. dollar, or $1.0250.
Osborne said the range of C$0.9765-75 was pivotal as the Canadian dollar has closed around 10 basis points on either side of that level since early last week.
Near term, he sees Canadian dollar support at C$0.9850 and resistance at C$0.9670.
He said the near-term trend is likely to be a weaker Canadian dollar given the difficult seasonal time for stock markets and risk-related assets and speculation about a potential third round of quantitative easing by the U.S. Federal Reserve.
Canadian bond prices rallied on the soft U.S. jobs figures, following U.S. Treasuries higher. [US/]
Even as investors weigh whether this signals a soft patch or a prolonged slowdown, markets have begun to come around to the view that government bonds should benefit in the near term as inflationary expectations will be contained.
Canada's two-year bondwas up 8 Canadian cents to yield 1.437 percent, while the 10-year bond advanced 33 Canadian cents to yield 2.988 percent. (Editing by Jeffrey Hodgson)
Our Standards: The Thomson Reuters Trust Principles.