* C$ backs off early session high
* Canada adds 27,100 jobs in August
* Bond prices lower across curve (Recasts)
By Frank Pingue
TORONTO, Sept 4 (Reuters) - Canada's currency was higher against the greenback on Friday morning but most of the early gains it made on upbeat Canadian and U.S. jobs data unraveled as appetite for risk diminished ahead of the long weekend.
The Canadian dollar was given an early boost after a report showed the Canadian economy unexpectedly added 27,100 jobs in August even though the unemployment rate rose to an 11-1/2 year high of 8.7 percent. [ID:nN04153956]
It then hit a high of C$1.0885 to the U.S. dollar, or 91.87 U.S. cents, after U.S. data showed employers cut fewer-than-expected jobs in August. [ID:nN03530870]
But the U.S. report also showed unemployment jumped to the highest level in 26 years, which helped lure traders back to the greenback due to its status as a safe-haven play.
By 9:40 a.m. (1340 GMT), the Canadian dollar had fallen back to C$1.0933 to the U.S. dollar, or 91.47 U.S. cents, which was still up from C$1.1033 to the U.S. dollar, or 90.64 U.S. cents, at Thursday's close.
"I really think the market is going to be a bit risk averse just in terms of not wanting to carry too much into a long weekend," said Steve Butler, director of foreign exchange trading at Scotia Capital.
"So by noon or 1 o'clock most of the markets should calm down, but that doesn't mean that we can't still see some pretty decent swings just as people try to square up going into a long weekend."
Financial markets in Canada and the United States will be closed on Monday for Labor Day.
BONDS PRICES STUCK LOWER
Canadian bond prices were lower across the curve as the pair of jobs reports lessened the appeal of secure government debt.
Analysts felt the domestic data was not expected to have much effect on the Bank of Canada, which has pledged to hold benchmark interest rates at a record low of 0.25 percent at least through June 2010 as long as inflation stays in check.
The two-year bond CA2YT=RR was down 5 Canadian cents at C$99.46 to yield 1.277 percent, while the 10-year bond CA10YT=RR shed 30 Canadian cents to C$103.07 to yield 3.376 percent.
The 30-year bond CA30YT=RR slipped 40 Canadian cents to C$118.60 to yield 3.896 percent. (Editing by Peter Galloway)