* Canadian dollar extends gains
* Bonds fall, take cue from rallying equities
* U.S. loses 651,000 jobs, in line with forecast (Adds details)
TORONTO, March 6 (Reuters) - The Canadian dollar climbed versus the U.S. dollar on Friday morning after U.S. data showed a massive job loss in February but one that wasn't as bad as some in the market had feared.
The U.S. economy shed 651,000 jobs in February, pushing the unemployment rate to its highest level in 25 years as companies buckled under the strain of recession. [ID:nN05339652].
The figure was near the consensus expectation of a 648,000 drop in nonfarm payrolls of economists polled by Reuters, but some had forecast losses as high as 800,000.
The Canadian dollar was in a basket of currencies rising against the greenback on Friday. The U.S. dollar has lately been favored as a safe haven in the face of global economic woes.
At 9:50 a.m. (1450 GMT), the Canadian dollar rose to C$1.2792 to the U.S. dollar, or 78.17 U.S. cents, up from Thursday's close at C$1.2884 or 77.62 U.S. cents.
"The initial knee-jerk reaction was to drive the Canadian dollar stronger as the first read on the U.S. employment report was that it wasn't quite as bad as the worst expectations," said Doug Porter, deputy chief economist, BMO Capital Markets.
"The main message is the market's worst fears for this report weren't quite realized so we've seen the Canadian dollar strengthen a bit on that and bonds come off their highs," he said.
Rising oil prices also supported the Canadian currency. Oil is a key Canadian export and often sets direction for the currency.
After the data, the currency moved as high as C$1.2765 to the U.S. dollar, or 78.34 U.S. cents, then pared gains. A slightly better tone to stock markets also reflected a loosening of risk aversion's grip.
Canadian bond prices turned lower after the U.S. data as market players prepared for an opening bounce on North American stocks, which had hit multiyear lows this week.
The Toronto Stock Exchange and major U.S. stock markets rose more than 1 percent in early action, supported by strength in commodity prices. The attractiveness of safe government debt is curbed when stock markets rise.
The two-year bond fell 7 Canadian cents to C$103.06 to yield 0.963 percent. The 10-year bond lost 22 Canadian cents to C$107.09 to yield 2.942 percent.
The 30-year bond dropped 45 Canadian cents to C$124.90 and yielded 3.589 percent. (Reporting by Ka Yan Ng and Jennifer Kwan; Editing by Peter Galloway)