* C$ strengthens on strong Canada jobs data * U.S. payrolls could trim gains * Bond prices lower across the curve By Andrea Hopkins TORONTO, Oct 7 (Reuters) - The Canadian dollar surged higher against its U.S. counterpart in early trade on Friday after the Canadian employment report came in far stronger than expected, with a big seasonal bump in teacher hiring. A greater-than-expected 60,900 new jobs helped slice Canada's unemployment rate to 7.1 percent in September from 7.3 percent in August, Statistics Canada said on Friday. This far exceeded the median forecast of 10,000 new jobs in a Reuters survey of economists after August's decline of 5,500. The most optimistic forecasters had predicted 30,000 new positions in September. "We were on a high set of expectations and we were pleasantly surprised; it was a very strong number," said Craig Wright, chief economist at Royal Bank of Canada. "We continue to bounce back, as expected, in the educational component, but the gains are more broadly based than that. It's a solid report and much stronger than anyone was looking for." The Canadian dollar climbed to a session high C$1.0326 to the U.S. dollar, or 96.84 U.S. cents, shortly after the data was released, up from Thursday's North American session at C$1.0378 to the U.S. dollar, or 96.36 U.S. cents. But analysts said the gains may be short-lived as the market focus turns to the U.S. nonfarm payrolls report due out at 8:30 a.m. (1230 GMT). U.S. employers are expected add 60,000 jobs in September, according to a Reuters survey of analysts, after August's flat reading. "What we've been seeing with the Canadian dollar is basically a risk on, risk off story, so depending on on how the U.S. nonfarm payrolls plays out in the next hour or so, you could see some of (the Canadian dollar gains) being unwound," said Mazen Issa, macro strategist at TD Securities. Friday is the last day of trading before the holiday weekend in both Canada and the United States, so volume is expected to peak early in the day. Bond prices were lower across the board. The two-year Canadian government bond lost 8 Canadian cents to yield 0.978 percent, while the 10-year bond lost 25 Canadian cents to yield 2.251 percent.