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* C$1.0517 vs U.S. dollar, or 95.08 U.S cents
* Europe bank package, U.S. data buoy risk sentiment
* Bond prices mixed
By Andrea Hopkins
TORONTO, Oct 5 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart in early trade on Wednesday as a better-than-expected U.S. employment report and some progress on the European debt crisis boosted risk appetite.
European shares and key commodities rose after ministers agreed to shore up euro zone banks against the spreading debt crisis and an IMF director said the fund might offer support by buying Spanish and Italian bonds. [MKTS/GLOB]
Together with an unexpectedly strong gain in U.S. private-sector employment, the European news gave some lift to riskier assets like Canada's commodity-linked currency, though the probability of a Greek default kept a lid on the rally.
"Of course there has been an improvement in sentiment after EU policymakers are potentially looking at recapitalization of European banks. The market attitude toward risk has picked up," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"But the backdrop is challenged, it will remain challenged, and throwing a tarp of money over banks to recapitalize them is really trying to find a solution to a problem that is not likely to go away any time soon."
At 9:10 a.m. (1310 GMT), the Canadian dollar CAD=D3 stood at C$1.0517 to the U.S. dollar, or 95.08 U.S. cents, up from Tuesday's North American session close at C$1.0549 to the U.S. dollar, or 94.80 U.S. cents.
It had briefly climbed as high as C$1.0498 to the U.S. dollar, or 95.26 U.S. cents, a session high, immediately after U.S. employment data was released.
U.S. private-sector employers added 91,000 jobs in September, above economists' expectations of 75,000, a report by a payrolls processor showed. For more see [ID:nEAPA50EH0].
Spitz said the market will also be watching for a report on the U.S. services sector due at 10:00 a.m. (1400 GMT). The Institute for Supply Management's non-manufacturing index could boost hopes for the U.S. economic recovery if it shows strong hiring. The closely watched U.S. nonfarm payrolls report is due on Friday, as is the Canadian employment report. ECONCA
Canada-dollar trade should hit technical resistance at C$1.0680, while support is layered between C$1.0465 and C$1.0415, Spitz said.
Separately, a Reuters poll released on Wednesday showed the Canadian dollar is expected to recover from 13-month lows to return to equal value with the U.S. dollar in six months' time, though projections are not as buoyant as they were before September's global meltdown. [CAD/POLL]
Median forecasts in a poll of 48 global foreign exchange strategists released showed the currency is seen at C$1.04 to the U.S. dollar, or 96.15 U.S. cents, one month from now, well above the 13-month low of C$1.0658 to the U.S. dollar, or 93.83 U.S. cents reached this week.
The Canadian dollar is expected to continue to strengthen, climbing to C$1.02 in three months, C$1.00 in six months and through parity to C$0.98 in a year's time, the poll showed.
Bond prices were mixed on Wednesday. The two-year Canadian government bond CA2YT=RR was unchanged with a yield of 0.882 percent, while the 10-year bond CA10YT=RR gained 3 Canadian cents to yield 2.097 percent. (Editing by Jeffrey Hodgson)