* C$ up at C$0.9934 or $1.0066
* Bonds drift higher across curve
By Claire Sibonney
TORONTO, Jan 6 (Reuters) - Canada's dollar firmed against its U.S. counterpart on Thursday, picking up steam for a second day as upbeat U.S. private employment data in the last session raised the outlook for the domestic economy.
Along with the greenback, the Canadian currency has benefited from greater optimism for the U.S. economic recovery.
"If North American consumer growth or economic growth is going to be stronger, then that provides some optimism for the export environment vis-a-vis Canada, and that's helping the currency ... but I think it's more the case that Canada is going to gain more traction against some of the crosses," said Jeremy Stretch, head of currency strategy at CIBC World Markets in London.
Stretch said performance against the euro and Australian dollar should be particularly interesting in the near term due to negative structural issues in Europe and Canada's recent lag against its Aussie commodity counterpart.
Against the U.S. dollar, the Canadian currency CAD=D4 traded in a narrow range between C$0.9925 and C$0.9971.
At 8:09 a.m. (1309 GMT), the currency stood at C$0.9934 to the U.S. dollar, or $1.0066, up from Wednesday's finish at C$0.9964 to the U.S. dollar, or $1.0036.
Stretch said the next significant support level for the U.S. dollar is just below the low reached on Monday at C$0.9889.
On the data front, domestic Ivey purchasing numbers and U.S. weekly jobless claims may provide some direction, but action is seen limited ahead of Friday's official employment reports on both sides of the border.
The jobless claims come a day after a report showing private employers added a surprising 297,000 jobs in December, which prompted economists to raise forecasts for the widely followed government nonfarm payrolls numbers.
"Certainly the labor market has been one of the elements which has been lagging behind, and if there's real evidence that maybe that's starting to improve as well, then that backs up the assumptions that maybe growth is going to be a little bit stronger in the U.S. and/or North American than previously assumed," added Stretch.
Canadian bond prices drifted higher, tracking U.S. Treasuries up, with yields coming off highs reached the previous day after the strong jobs data.
The two-year bond CA2YT=RR rose half a Canadian cent to yield 1.762 percent, while the 10-year bond CA10YT=RR added 16 Canadian cents to yield 3.260 percent. (Reporting by Claire Sibonney; editing by Jeffrey Benkoe)