By Andrea Hopkins
TORONTO (Reuters) - The Canadian dollar hit its strongest level in more than a week against its U.S. counterpart on Thursday after U.S. data showed a fall in new jobless benefit claims, briefly tempering broader fears about tepid U.S. economic growth.
The data fueled investor appetite for riskier assets including stocks and helped support the prices of some commodities. While the Canadian currency climbed in early trade, activity fell off when the data bounce faded.
"It's very, very light volumes, very light activity, there are no big drivers across most of the markets, whether bonds or currencies," said Mark Chandler, head of Canadian fixed income and currency strategy at Royal Bank of Canada.
"The U.S. dollar was a bit of an outlier, weaker across the board, and the Canadian dollar garnered some strength from that early on," he added.
The number of Americans filing new claims for unemployment benefits fell last week by a surprisingly large 16,000 to 339,000, offering reassurance the bottom is not falling out of the labor market despite signs of slower growth.
The data countered several weeks of signs that the U.S. economic activity softened in March and early April, and recent weak global economic data, including record-high jobless figures from Spain on Thursday.
The unexpected strength in the U.S. labor market helped send U.S. stock markets up and government bonds down, aided by earnings that beat lowered expectations.
The Canadian dollar ended the North American session at C$1.0208 to the U.S. dollar, or 97.96 U.S. cents, up from C$1.0256, or 97.50 U.S. cents, at Wednesday's close.
Chandler said he did not see much that might drive trading in the Canadian dollar on Friday, with the only major data being U.S. GDP for the first quarter. He expects the Canadian dollar to weaken in the weeks and months ahead, with few signs of the Canadian economic strength that buoyed it during parts of last year.
"We continue to look for the Canadian dollar to weaken somewhat, get to C$1.05 by the late summer period," he said.
Canadian markets are waiting for the Bank of Canada to announce a replacement for Governor Mark Carney, who is leaving in June to head the Bank of England. The bank's current deputy, Tiff Macklem, is widely expected to take the helm, but analysts say there is always a chance of a surprise.
The loonie, as the currency is colloquially known, has traded within a tight range since the central bank last week stuck to its oft-repeated view that its next interest rate move will be a rise.
Canadian government bond prices were mixed. The two-year bond was down half a Canadian cent to yield 0.947 percent and the benchmark 10-year bond was down 20 Canadian cents to yield 1.747 percent.
(Editing by Jeffrey Hodgson and Bob Burgdorfer)