* C$ ends up at C$1.0177 vs US$, or 98.26 U.S. cents
* Exports helps Canada post surprise trade surplus in Sept
* Bond prices ease across curve, bond market closed Friday (Updates to close, adds details, comments)
By Claire Sibonney
TORONTO, Nov 10 (Reuters) - The Canadian dollar edged higher against the U.S. dollar on Thursday as global markets stabilized on easing euro zone concerns and domestic trade data came in much stronger than expected.
A surge in energy exports helped Canada post a surprise trade surplus in September, the first since January 2011, prompting analysts to predict the economy would return to growth in the third quarter. [ID:nN1E7A90DQ]
The data gave the currency an early boost but some of the gains evaporated as investors shifted their focus to choppy trading in U.S. equities and the euro after a dramatic week that saw Italy move to the center of Europe's woes.
"It's been a pretty volatile session," said David Bradley, director of foreign exchange trading at Scotia Capital.
"I think the bias is still for a stronger (U.S.) dollar as we head forward, I think we're going to see more political risk in Europe which is going to be negative for the euro and should be positive for dollar/Canada as well."
Italy moved closer to a national unity government on Wednesday, following Greece's lead in seeking a respected veteran European technocrat to pilot painful economic reforms in an effort to avert a meltdown in euro zone bond markets. [ID:nL6E7M96E9]
Italian bond yields also fell back from Wednesday's record highs of around 7.5 percent but remained elevated, just below the 7 percent level seen as unsustainable.
"The market is looking a bit more optimistic and that optimism has reflected itself in overall offers to the U.S. dollar with the Canadian dollars attracting some bids," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
The Canadian dollar CAD=D4 ended the North American session at C$1.0177 against the U.S. dollar, or 98.26 U.S. cents on Thursday, up from Wednesday's close at C$1.0217 or 97.88 U.S. cents.
The move higher followed a 1.3 percent drop the day before on signs Italian borrowing costs reached a breaking point after Prime Minister Silvio Berlusconi's insistence on elections instead of an interim government opened the way to prolonged instability. [ID:nL6E7M93EM]
Scotia's Bradley said the market was happy to buy Canadian dollars around the mid-C$1.02 area and sell the currency below C$1.01.
He also noted that volume should be light on Friday because of the Remembrance Day holiday and that any headline risk is probably going to have an exaggerated impact on the currency.
The Canadian bond market closed early on Thursday ahead of the banking holiday. Government bond prices eased, following U.S. Treasuries lower. [US/]
The two-year Canadian government bond CA2YT=RR fell 17 Canadian cents lower to yield 0.910 percent, while the 10-year bond CA10YT=RR dropped 47 Canadian cents to yield 2.140 percent. (With additional reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)