*C$ at C$0.9928 vs US$, or $1.0073
*Bond prices cut losses, outperform Treasuries
(Updates with details, commentary)
By Claire Sibonney
TORONTO, Sept 9 (Reuters) - The Canadian dollar weakened against the U.S. dollar on Friday, as fears about U.S. and European growth hurt risk sentiment and domestic employment data showed Canada was not immune to a deteriorating global outlook.
Canada's economy surprised markets by reporting 5,500 net job losses in August, overshadowing other signs the economy was making a comeback after a bleak second quarter, and keeping central bank rate hikes off the table. [ID:nN1E78804B]
A Reuters poll of primary dealers on Wednesday indicated the Bank of Canada will not raise interest rates until the third quarter of 2012. [CA/POLL]
"It's modestly disappointing so (the Canadian dollar) should be somewhat weaker on this report, but to be fair, most of the impetus both for interest rates and currency is likely to be driven more by overall risk appetite and what's happening abroad," said Mark Chandler, head of fixed income and currency strategy at RBC Capital Markets.
The Canadian dollar was already softer heading into the report, driven by concern that a U.S. plan to stimulate jobs will be held up in Congress and after the European Central Bank dropped its tightening bias and forecast lower growth in the debt-plagued euro zone. [MKTS/GLOB] [FRX/]
At 7:57 a.m. (1157 GMT), the Canadian dollar stood at C$0.9928 to the U.S. dollar, or $1.0073, down from Thursday's North American session close at C$0.9880 to the U.S. dollar, or $1.0121.
The currency CAD=D4 dropped to a session low of C$0.9951 against the U.S. dollar, or $1.0049 immediately following the jobs report but recovered somewhat after investors digested some of the positive details, such as a gain of 25,700 full-time jobs.
"We still, for eight months of the year, had very steady, significant full-time job growth," said Chandler. He noted the unemployment rate edged up, but at 7.3 percent it was only 0.1 percentage point away from its ten-year average.
Canadian bond cut earlier losses, outperforming U.S. Treasuries across the curve. [US/].
The two-year bond CA2YT=RR was up 4 Canadian cents to yield 0.867 percent, while the 10-year bond CA10YT=RR was down 4 Canadian cents to yield 2.220 percent.
(Additional reporting by Alison Martell, Editing by Chizu Nomiyama)