*

Canadian dollar gains 0.2% against the greenback

*

Price of U.S. oil settles 1.3% higher

*

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%.