* C$ little changed at $1.0286 vs greenback
* Bond prices slide with U.S. Treasuries on U.S. jobs data
* Election risk may weigh on C$ in weeks ahead (Updates to close)
By Ka Yan Ng
TORONTO, March 3 (Reuters) - Canada's dollar finished a touch higher against the greenback on Thursday in a session in which the currency was mainly a spectator to the major events in the foreign exchange market.
Market focus moved to the European Central Bank after comments by ECB President Jean-Claude Trichet reinforced expectations of a near-term interest rate rise, sparking a rally in the euro. [FRX/] [ID:nLDE7221RF]
The price of oil, a key Canadian export, fell and provided little support for the currency after Venezuela said its proposal for a negotiated solution to the Libyan conflict was accepted by the North African government, and the Arab League said the plan was being considered. [O/R]
The Canadian dollar briefly fell as low as C$0.9754 to the U.S. dollar, or $1.0252, but quickly returned to trade close to Wednesday's finish. Overall, the currency moved in a 37-point range, narrower than in the previous session.
The Canadian dollar CAD=D4 closed at C$0.9722 to the U.S. dollar, or $1.0286, up from Wednesday's North American finish of C$0.9724, or $1.0284.
"We're sitting back with our sunglasses on and everyone is leaving (the Canadian dollar) alone. Everything else seems to be moving around it. It may take a while to break below this C$0.97 level firmly," said John Curran, senior vice president at CanadianForex.
The Canadian dollar has largely been moving between C$0.97 and C$0.98 for the past five sessions, with brief forays outside that band.
The Canadian dollar could come under pressure in the weeks ahead as election talk swirls around the federal budget, due to be presented on March 22. The three opposition parties will have to decide whether to support the minority Conservative government's budget in the House of Commons or risk facing an election.
Prime Minister Stephen Harper said on Thursday the priority of Canadians is the state of the economy, and not having an election. [ID:nN02223480] [ID:nTZO3EE7QX]
"If at all, what you might see is a bit of negativity towards Canada due to the upcoming budget," Curran said. "It could get some political risk into the currency but other than that, it's still a pretty good story for Canada. That's probably why we're just hanging out here."
BONDS EYE U.S. JOBS DATA
Canadian bond prices fell across the curve following the lead of U.S. Treasuries, which were hurt by a stock market rally that drew investors away from safe-haven government debt.
The stock market drew comfort from the Venezuelan peace plan for Libya, which, if successful, could help lower oil prices and remove a major headwind for equities. For details, see [ID:nLDE72200E] [.N]
"People are hopeful (for a resolution)," said Sheldon Dong, fixed income analyst at TD Waterhouse Private Investment, noting there was a measure of credibility with the involvement of the Arab League and Venezuela.
A sharp drop in weekly U.S. jobless claims to a 2-1/2-year low also helped to buoy stock market sentiment ahead of Friday's U.S. nonfarm payrolls data.
Those figures will be an important signal as the market looks for signs that U.S. economic recovery has taken root. U.S. employment is expected to have soared in February to its biggest gain in nearly a year. [ID:nN01163324]
The two-year bond CA2YT=RR fell 10 Canadian cents to yield 1.881 percent, while the 10-year bond CA10YT=RR lost 38 Canadian cents to yield 3.392 percent. Canadian bonds outperformed their U.S. counterparts across the curve. (Editing by Peter Galloway)