CANADA FX DEBT-C$ soars on upbeat jobs data, rate speculation

* C$ ends at 95.75 U.S. cents, up 3.6 pct on week

* Hits highest level since Sept. 2008

* Talk of early Bank of Canada rate hike boosts C$

* Bond prices lower across the curve
(Updates to close, adds details, quotes)

By Frank Pingue and Jennifer Kwan

TORONTO, Oct 9 (Reuters) - The Canadian dollar raced to a
one-year high on Friday as domestic jobs data zoomed past
forecasts and sparked chatter about whether the Bank of Canada
will be forced to raise rates sooner than expected.

The currency shot to C$1.0411 to the U.S. dollar, or 96.05
U.S. cents, its highest level since September 2008, after data
showed the economy created 30,600 jobs in September, six times
more than expected. [ID:nN0953178]

Also helping to power the currency's latest rally was talk
about whether the central bank may now opt to move early on
interest rates and give up its conditional pledge to keep rates
at their historic low of 0.25 percent at least until mid-2010.

"It's all on the back of the strong employment report which
showed that Canada is creating jobs," said Sal Guatieri, senior
economist at BMO Capital Markets.

"It likely suggests the Bank of Canada will move on rates
ahead of the Federal Reserve, albeit not for another year."

The Canadian currency finished at C$1.0444 to the U.S.
dollar, or 95.75 U.S. cents, up from C$1.0522 to the U.S.
dollar, or 95.04 U.S. cents, at Thursday's close. The Canadian
unit is up 3.6 percent for the week.

Talk of rate hikes ramped up this week after the Reserve
Bank of Australia raised its interest rate and became the first
central bank in the Group of 20 nations to tighten monetary
policy as the financial crisis abates. [ID:nSYD520296]

However, analysts said the currency's rally, which makes
life tougher for Canadian exporters, has had the same braking
effect on the economy as higher rates. As a consequence, the
Bank of Canada still has latitude to hold rates steady, giving
it flexibility, especially if the United States, Canada's main
trading partner, fails to sustain its own recovery.
[ID:nN0965028]

Still, the rate speculation, combined with a recent string
of reassuring economic reports on both sides of the border
helped propel commodity prices earlier this week, with oil
CLc1 shooting above $72 a barrel, while gold XAU= hit a
record high above $1,060 an ounce. [O/R] [GOL/]

As well, two Bank of Canada surveys also showed businesses
were more upbeat in the third quarter about sales and credit,
but continue to postpone major investments because they expect
the recovery to be very gradual. [ID:nOTW002436]

"The market is looking at Canada recovering from the
recession faster than the States and other countries in the
world," said David Bradley, director of foreign exchange
trading, Scotia Capital.

"The natural interest would be to buy Canadian dollars on
the back of that."

BOND PRICES WEAKEN

Domestic bond prices weakened as the market priced in an
improving economic outlook and speculation about an earlier
than anticipated Bank of Canada rates move, said Guatieri.

The market also followed the bigger U.S. Treasury market
where debt prices plunged on fears of monetary tightening after
comments by the Federal Reserve. [US/]

The two-year CA2YT=RR bond sank 41 Canadian cents to
C$99.05 to yield 1.707 percent, while the 30-year bond
CA10YT=RR fell C$1.40 Canadian cents to C$117.20 to yield
3.969 percent.

The Canadian market notched a mixed performance against
U.S. Treasury bonds, with the 2-year Canadian yield about 73
basis points above its U.S. counterpart, from around 62 basis
points on Thursday.

The 30-year Canadian yield was about 26 basis points below
the U.S., versus 19 basis points below on Thursday.
(Editing by///)