*

Loonie touches a two-week high at 1.3479

*

Canada's trade surplus widens in February

*

Price of U.S. oil settles 1.4% higher

*

Canadian bond yields ease across curve

By Fergal Smith

TORONTO, April 4 (Reuters) - The Canadian dollar edged

lower against its U.S. counterpart on Thursday, giving back its

earlier gains, as investors assessed recent strength in

commodities and awaited domestic jobs data that could offer

clues on prospects of avoiding a recession.

The loonie was trading 0.1% lower at 1.3535 to the

U.S. dollar, or 73.88 U.S. cents, after touching its strongest

intraday level since March 21 at 1.3479. The pullback from a

two-week high came as Wall Street turned lower.

Weaker-than-expected U.S. services data and an upside

breakout in copper prices had helped support the Canadian

currency in recent days, said Erik Bregar, director, FX &

precious metals risk management at Silver Gold Bull.

"The commodity trade could be a tailwind for the Canadian

(dollar) if it keeps going," Bregar added.

Canada is a major producer of commodities, including oil,

copper and gold. It recorded a bigger-than-expected trade

surplus of C$1.39 billion ($1.03 billion) in February as a

record level of unwrought gold helped exports outpace the rise

in imports.

Copper was up 1.1% on Thursday, while the price of

oil settled 1.4% higher at $86.59 a barrel.

Still, the Canadian dollar is set to strengthen less than

previously thought over the coming year as sticky inflation

potentially delays Federal Reserve interest rate cuts and

uncertainty grows ahead of the U.S. presidential election, a

Reuters poll found.

Economists expects Canada's employment data, due on Friday,

to show the economy adding 25,000 jobs in March.

"The market will very much welcome something that is better

than expected. Hopes are rising that we are not going to see a

recession," Bregar said.

Canadian bond yields eased across the curve. The 10-year

was down 2.1 basis points at 3.574% after on Tuesday

touching its highest intraday level in nearly three weeks at

3.678%.