* Drops to 96.63 US cents after hitting 2-1/2 month high
* Bonds fall across curve (Recasts, adds quote)
By Jennifer Kwan
TORONTO, Jan 7 (Reuters) - The Canadian dollar was lower against the U.S. dollar at midday on Thursday, pressured by a stronger greenback and equity markets that stumbled after recent gains.
The U.S. dollar also firmed against the euro and yen, underpinned by weak German and euro zone economic data as well as by comments by Japan's new finance minister that he wanted a weaker yen. [FRX/]
"Broad-based U.S. dollar strength is weighing on currencies globally," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
At 12:07 p.m. (1707 GMT), the Canadian dollar was at C$1.0349 to the U.S. dollar, or 96.63 U.S. cents, down from Wednesday's finish of C$1.0325 to the U.S. dollar, or 96.85 U.S. cents.
An oil price that sagged below $83 a barrel and softer gold prices [O/R] [GOL/] also weighed on the commodity-linked Canadian dollar.
Weakness on global equity markets, which are typically a gauge of risk appetite, ahead of key U.S. jobs data due on Friday was also a factor in the currency's drop. [MKTS/GLOB].
"There was a slight risk aversion bias in the market," Strauss said.
"Ahead of such important data, a lot of longer-term investors would rather wait for the data before adding to their views or taking profit," he added.
Early in the day, the Canadian dollar shot as high as C$1.0291 to the U.S. dollar, or 97.17 U.S. cents, largely on bullish hopes that U.S. and Canadian jobs data on Friday would be another signal of economic revival. [ID:nN0595130]
Strauss said he expected the currency to trade in a range between C$1.03 and C$1.04 until the release of the jobs data.
Canadian bond prices were flat to slightly higher at the short end, but lower at the longer end, mimicking U.S. Treasuries, which firmed on Thursday ahead of the closely watched U.S. jobs report. [US/]
The two-year government bond CA2YT=RR ticked 2 Canadian cents higher to C$99.77 to yield 1.376 percent, while the 10-year bond CA10YT=RR shed 35 Canadian cents to C$113.60 to yield 4.163 percent. (Editing by Peter Galloway)