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* Canadian dollar at C$1.2545 or 79.71 U.S. cents
* Bond prices lower across the maturity curve
By Solarina Ho
TORONTO, June 5 (Reuters) - The Canadian dollar retreated against a rallying U.S. dollar on Friday as data showing a stronger-than-expected U.S. labor market outweighed surprisingly robust Canadian employment numbers.
Canadian employers added 58,900 jobs last month, far above the 10,000 jobs economists polled by Reuters had expected, and the biggest increase in seven months.
But the Canadian jobs figures, which have been volatile month to month, were outshone by U.S. numbers that sent the U.S. dollar jumping more than 1 percent against a basket of currencies.
U.S. job growth accelerated sharply in May, rising by 280,000, the largest gain since December, while wages also picked up. The latest numbers signaled momentum in the economy, which bolstered the prospects of a U.S. Federal Reserve interest rate hike in September.
"It would be very tough for the Bank of Canada to be cutting interest rates in an environment where the Fed is seriously considering raising rates," said Doug Porter, chief economist at BMO Capital Markets. "I think the U.S. numbers just fuel the view that the Fed will indeed be raising rates later this year."
At 9:46 a.m. EDT (1346 GMT), the Canadian dollar, which was outperforming other major currencies against the U.S. dollar, was at C$1.2545 to the greenback, or 79.71 U.S. cents.
This was nearly a Canadian cent off the C$1.2450, or 80.32 U.S. cents it touched immediately after the Canadian jobs data was released, and nearly half a cent weaker than the Bank of Canada's official close of C$1.2504 to the greenback, or 79.97 U.S. cents, on Thursday.
The greenback surge also pressured U.S. dollar-denominated crude prices, which reversed early gains. The loonie is typically sensitive to price moves in oil, a key Canadian export. U.S. crude prices were down 1.66 percent at $57.04, while Brent crude lost 1.53 percent to $61.08.
Canadian government bond prices were lower across the maturity curve, with the two-year price down 14 Canadian cents to yield 0.649 percent, and the benchmark 10-year falling 91 Canadian cents to yield 1.837 percent.
The Canada-U.S. two-year bond spread was -9.1 basis points, while the 10-year spread was -58.2 basis points. (Additional reporting by Allison Martell; Editing by Peter Galloway)