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* Canadian dollar sinks on disappointing jobs data
* Canada Nov loses 70,600 jobs, most in 26 years
* Bonds gain on safe-haven appeal
TORONTO, Dec 5 (Reuters) - The Canadian dollar sank versus the U.S. dollar on Friday as employers in Canada cut more jobs than expected last month, reflecting an economy that is inching closer to recession.
Bond prices gained as worries about recession and the potential for more rate cuts renewed the safe-haven appeal of government debt.
At 10 a.m. (1500 GMT), the currency was at C$1.2952 to the U.S. dollar, or 77.21 U.S. cents. That is down from C$1.2781 to the U.S. dollar, or 78.24 U.S. cents, at Thursday's close. The currency dropped 2 percent on Thursday, its seventh straight day of losses, on the back of a sharp fall in oil prices and political uncertainty in Canada.
Canada's economy shed 70,600 jobs in November -- more than any other month since June 1982 and nearly triple the forecast figure -- as the economic downturn forced layoffs in the Ontario manufacturing sector, Statistics Canada said. The unemployment rate ticked higher to 6.3 percent from 6.2 percent in October. [ID:nN05440350]
The U.S. economy shed a shocking 533,000 jobs in November for the weakest performance in 34 years, data showed. [ID:nN04409522]
"The release of disastrous payroll data in both the U.S. and Canada is having a clear influence in currency flows this morning," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"There is no tolerance for risk at the moment. Commodity bloc currencies are in particular faltering the most."
He said risk aversion was also a driving force, as the U.S. dollar has been seen as a safe haven recently.
The currency was also under pressure from softening crude oil prices, which fell to under $43 a barrel on worries about falling demand. The Canadian dollar has tracked crude prices closely due to Canada's big oil exports.
Bond prices rose following the pair of jobs reports, but pared gains to nearly flat even though the stock markets had a negative tone.
Short-end prices were initially sharply higher, reflecting anticipation that North America's central banks will cut interest rates steeply this month after some aggressive rate cuts overseas earlier this week.
The Canadian jobs report underlines market expectations that the Bank of Canada will chop its key overnight lending rate next Tuesday by at least 50 basis points.
The central bank has reduced its key overnight lending rate by 225 basis points since December 2007 to 2.25 percent and has signaled its intention to ease further.
The two-year bond managed to eke out a small gain of 4 Canadian cents to C$102.41 to yield 1.509 percent. The 10-year bond was up 5 Canadian cents at C$109.85 to yield 3.045 percent.
The yield spread between the two-year and 10-year bond was at 159 basis points, up from 158 basis points at the previous close.
The 30-year bond rose 10 Canadian cents to C$122 to yield 3.738 percent. In the United States, the 30-year Treasury yielded 3.0475 percent. (Reporting by Ka Yan Ng; editing by Peter Galloway)