Canadian dollar extends recovery ahead of jobs report

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Canadian dollar gains 0.2% against the greenback

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Price of U.S. oil settles 1.3% higher

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Bond yields rise across the curve

By Fergal Smith

TORONTO, Aug 8 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as financial markets globally continued to heal and ahead of domestic jobs data that could guide expectations for additional Bank of Canada interest rate cuts.

The loonie was trading 0.2% higher at 1.3732 to the U.S. dollar, or 72.82 U.S. cents, extending its recovery from a near two-year low of 1.3946 on Monday when equity markets tumbled.

The currency has benefited from increased stability in financial markets in recent days, said Amo Sahota, director at Klarity FX in San Francisco.

"The reset button has been hit and CAD has appreciated accordingly," Sahota said.

Wall Street's main indexes rose as economic data suggested the fear that the labor market was unraveling was overblown, while the price of oil, one of Canada's major exports, settled 1.3% higher at $76.19 a barrel.

"Now the market is just resetting its expectations and looking at, one, the jobs report coming up for Canada, and then trying to prepare itself for what happens at the fourth of September meeting from the Bank of Canada," said Sahota.

Canada's employment report for July, due on Friday, is expected to show the economy adding 22,500 jobs and the unemployment rate rising to 6.5% from 6.4%.

The BoC is expected to cut its benchmark interest rate further at its next policy decision on Sept. 4, swaps market data shows, after lowering it to 4.50% last month.

Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 3.1 basis points at 3.181%, adding to its rebound from a 15-month low on Monday at 2.947%. (Reporting by Fergal Smith; Editing by Aurora Ellis)