CANADA FX DEBT-C$ boost from strong Canadian jobs data, weak US numbers

*  C$ firms to C$1.0409 vs US$, or 96.07 U.S. cents
    *  Bond prices rise across maturity curve

    By Leah Schnurr
    TORONTO, Sept 6 (Reuters) - The Canadian dollar rallied on
Friday, touching its firmest level in about two and a half weeks
after employment figures for last month were unexpectedly strong
in Canada and weaker than forecast in the United States.
    The Canadian economy created 59,200 jobs last month, nearly
triple the 20,000 jobs economists had predicted. Most of the
rebound was in part-time work, however, and followed a 39,400
loss in July. The unemployment rate nudged lower to 7.1 percent
from 7.2 percent. 
    The data saw the loonie strengthen to as much as
C$1.0381, or 96.33 U.S. cents, and ended the session at C$1.0409
versus the U.S. dollar, or 96.07 U.S. cents, firmer than
Thursday's close at C$1.0506, or 95.18 U.S. cents.
    "The headline is outstandingly strong and once again it
reinforces the volatility we've been getting in the Canadian job
numbers," said Craig Alexander, chief economist at
Toronto-Dominion Bank.
    "It's averaging around 12,000 a month, which is a lackluster
pace of employment growth and is consistent with an economy that
is growing at a modest pace."
    At the same time, in the United States, 169,000 jobs were
created, short of economists' expectations of 180,000 new jobs.
The miss, along with downward revisions to previous months,
sowed some uncertainty over when the Federal Reserve will start
to pull back its economic stimulus efforts. 
    Many investors expect the Fed will announce a reduction in
the pace of its $85 billion a month in bond purchases when the
central bank meets in mid-September. Friday's jobs report
muddied the waters and helped take the greenback lower against a
basket of currencies.
    Still, economists at a majority of U.S. primary dealers
expect the Fed to announce later this month it will cut the size
of its asset purchases. Economists did scale back the predicted
size of the reduction. 
    "The market by and large continues to see that tapering
begins in September," said Jack Spitz, managing director of
foreign exchange at National Bank Financial.
    "The U.S. data was not negative, it was positive, it just
wasn't as positive as one would have liked should they have been
in the camp that says there is tapering (coming)."
    The Canadian jobs data did not change expectations the Bank
of Canada will keep interest rates on hold at its next policy
    A Reuters poll last week showed economists were forecasting
the next interest rate hike would take place during the fourth
quarter of 2014. 
    "Bottom line, the report is unlikely to alter Bank of Canada
policy near term, leaving the Bank of Canada on the sidelines,"
said Paul Ferley, assistant chief economist at Royal Bank of
    "The issue they're dealing with right now is getting a sense
after the modest gain in GDP growth in the second quarter of how
much of a rebound we're likely to get in Q3."
    Prices for Canadian government debt rose with the two-year
bond up 3 Canadian cents to yield 1.290 percent and
the benchmark 10-year bond climbing 31 Canadian
cents to yield 2.771 percent.