* C$ at C$1.1039 vs US$, or 90.59 U.S. cents * Canada adds higher-than-expected 29,400 jobs in January * U.S. adds lower-than-expected 113,000 jobs * Markets reduce bet on a Bank of Canada rate cut By Leah Schnurr TORONTO, Feb 7 (Reuters) - The Canadian dollar rose against the greenback on Friday, giving it its biggest weekly gain in five months, after a rebound in domestic hiring in January cooled speculation that the central bank will cut interest rates. Data showed the Canadian economy added 29,400 jobs in January after losing 44,000 jobs in December, while the unemployment rate fell to 7.0 from 7.2 percent. It was the largest employment gain since August and beat market expectations for about 20,000 new hires. Full-time positions had the largest increase since last May. "(It) dampens expectations of the possibility of the Bank of Canada having to cut rates. But certainly with inflation remaining low, there's no pressure to start moving rates higher," said Paul Ferley, assistant chief economist at Royal Bank of Canada. After the data, overnight index swaps, which trade based on expectations for the central bank's policy rate, priced in a lower expectation for an interest rate cut in March, when the Bank of Canada will next announce its rate policy. The reassuring jobs data pushed the Canadian currency to its highest level in a more than two weeks. "The loonie has been given a little bit of a chance to spread its wings," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. At the same time, job creation south of the border has slowed over the past two months, raising worries the U.S. economy may be losing momentum. Still, the figures were unlikely to dissuade the U.S. Federal Reserve from its plan to unwind its economic stimulus, meaning the longer-term trend of a stronger U.S. dollar and weaker Canadian currency is still intact, Smith said. "The Fed seems content to continue to remove about $10 billion of its asset purchases per meeting and probably have it wound down by the end of 2014," he said. "As that happens, we'll see the normalization and increase in interest rates in the U.S., which will attract investment and money flows into the U.S. dollar, to the detriment of the Canadian dollar." The Canadian dollar ended the North American session at C$1.1039 to the U.S. dollar, or 90.59 U.S. cents, stronger than Thursday's close of C$1.1070, or 90.33 U.S. cents. The currency has regained some ground since touching a 4-1/2 year low last week as investors booked profits, putting it on track to rise 0.8 percent against the U.S. dollar this week, according to Thomson Reuters data. That would be its strongest week since early September. Still, the loonie is likely not out of the woods yet, with analysts in a recent poll forecasting the Canadian dollar will trade at C$1.12 in six months from now. Canadian government bond prices were higher across the maturity curve, with the two-year up half a Canadian cent to yield 0.978 percent and the benchmark 10-year up 31 Canadian cents to yield 2.398 percent.