CANADA FX DEBT-C$ drives to 2-1/2 year high on jobs data

* C$ hits highest point since May 2008

* Bonds sink across the curve

* Canada adds 69,200 jobs vs forecast of 15,000 gain

* U.S. payrolls up meager 36,000
(Adds details)

By Ka Yan Ng

TORONTO, Feb 4 (Reuters) - The Canadian dollar hit its
highest level against the U.S. dollar since May 2008 on Friday,
while bond prices held lower after a U.S. government report
showed employment rose far less than expected in January.

Stronger-than-expected Canadian job gains for January
underpinned the Canadian dollar's climb to as high as C$0.9832
to the U.S. dollar, or $1.0171.

At 9:27 a.m. (1427 GMT), the currency CAD=D4 was at
C$0.9856 to the U.S. dollar, or $1.0146, still firmer than
Thursday's North American session close at C$0.9910 to the U.S.
dollar, or $1.0091.

U.S. employment rose by a meager 36,000 jobs in January,
far less than the 145,000 increase the market had expected, but
the unemployment rate fell to its lowest level since April
2009.

The modest U.S. jobs gain was at odds with other data for
January, which had suggested employment growth was picking up,
but severe snow storms that slammed large parts of the nation
may be partially to blame for the weak figure. [ID:nLLA4DE7BA]

"It was a fairly soft U.S. report but I think a lot of
people are trying to look through it on the back of
weather-related issues," said Camilla Sutton, chief currency
strategist at Scotia Capital.

She said the weak U.S. headline figure did not have a deep
impact on the U.S. dollar, which allowed the Canadian dollar to
strengthen on the back of Canada's own set of jobs data and
outperform all the other major currencies.

Canada added 69,200 jobs in January, more than quadruple
the forecast of a 15,000 gain. The unemployment rate edged up
to 7.8 percent from 7.6 percent in December as more people
sought work, according to Statistics Canada data.
[ID:nSCL4DE790]

Both sets of jobs figures kept Canadian bond prices in
negative territory, as economic recovery hopes have recently
gained more traction.

In particular, the short-dated interest-rate sensitive
front end was steeply lower on the notion that the Bank of
Canada may start raising interest rates sooner than expected.

"I find the Bank of Canada doesn't tend to overreact much
to one month's job figures," said Doug Porter, deputy chief
economist at BMO Capital Markets. "They'll certainly take note
of this but they'll also note the point that the unemployment
rate backed up by a couple tenths of a percent. So it wasn't a
completely one-sided show of force"

"As a stand-alone report there's no question about it, it's
very supportive for the currency."

The two-year bond CA2YT=RR was 14 Canadian cents lower
to yield 1.842 percent, while the 10-year bond CA10YT=RR
dropped 30 Canadian cents to yield 3.462 percent.
(Additional reporting by Pav Jordan; editing by Peter
Galloway)