* C$ erases bulk of overnight selloff
* Rally follows upbeat North American data
* Bond prices little changed across curve (Recasts)
By Frank Pingue
TORONTO, Aug 6 (Reuters) - Canada's currency rallied off an overnight low and was flat versus the U.S. dollar on Thursday morning as the latest North American data helped support a view that the worst of the world recession is over.
The Canadian dollar rose to C$1.0695 to the U.S. dollar, or 93.50 U.S. cents, following data that showed Canadian builders unexpectedly took out more permits in June than in May as a rebound in the housing market continued. [ID:nN06293340]
While not typically a market mover, the data helped fan a deeply rooted view that the global economy is on the mend and lifted the domestic currency from an overnight low of C$1.0749 to the U.S. dollar, or 93.03 U.S. cents.
"Commodity prices and base metals prices still provide the underlying foundation for the Canadian dollar and any sort of marginal good news just helps provide some impetus to the Canadian dollar," said David Watt, senior currency strategist at RBC Capital Markets. "But it's the general trend in global sentiment that's the key driver right now."
Also helping to support risk appetite was U.S. data that showed the number of people filing initial claims for jobless benefits fell in the latest week. [ID:nN05350423].
That report was followed by comments from European Central Bank President Jean-Claude Trichet, who said he sees a gradual recovery in 2010. [ID:nFAE005213]
At 9:20 a.m. (1320 GMT), the Canadian unit was at C$1.0708 to the U.S. dollar, or 93.39 U.S. cents, down from C$1.0701 to the U.S. dollar, or 93.45 U.S. cents, at Wednesday's close.
The impact of the latest data will likely be short-lived and the domestic currency could slip into a tight range ahead of the marquee monthly jobs data due out on Friday.
Markets expect Statistics Canada to report net job losses in July of 17,500, pushing the unemployment rate to an 11-year high of 8.8 percent. [ID:nN05250302]
"The market is just on hold for upcoming employment reports ... a more dominant trend will emerge on Friday once we get a reading on both the Canadian and U.S. jobs reports," said Paul Ferley, assistant chief economist at Royal Bank of Canada.
In the previous session, Canada's dollar erased an early slide and closed higher versus the greenback as hopes for improvement in the global economy helped to ignite greater appetite for riskier assets.
BONDS MOSTLY FLAT
Canadian bond prices pared early gains and were mostly flat across the the curve, tracking the slide in the U.S. Treasury and European bond markets after the Bank of England raised its quantitative easing total to an unexpectedly large 175 billion pounds. [ID:nL6430949]
But dealers remained a bit caution ahead of Friday's jobs figures and that helped to keep prices up a touch after retreating in the last two sessions.
The two-year Canadian bond was unchanged at C$99.05 to yield 1.473 percent, while the 10-year bond gained 8 Canadian cents to C$101.38 to yield 3.581 percent.
The 30-year bond rose 20 Canadian cents to C$115.65 to yield 4.056 percent. In the United States, the 30-year Treasury yielded 4.564 percent.
(Additional reporting by by Ka Yan Ng) (Editing by Theodore d'Afflisio)