* C$ at C$1.0167 vs US$ or 98.36 U.S. cents
* Employment drops 54,000 vs gain of 12,000 forecast
* Markets price in increased chance of a rate cut
* Eye on key Greek confidence vote
* Bond prices rise, outperform U.S. Treasuries (Updates to close)
By Andrea Hopkins
TORONTO, Nov 4 (Reuters) - The Canadian dollar ended weaker on Friday after data showed an unexpected plunge in Canadian employment in October, which boosted the chances of an eventual Bank of Canada interest rate cut.
Renewed doubts about the future of Europe's debt bailout package and the jitters ahead of paliamentary confidence vote for the Greek government also kept the currency and other risk assets on the defensive, overshadowing signs of improvement in Friday's U.S. jobs report for October.
"The big driver has been that Canadian jobs report ... (but) in terms of event risk today, we're still waiting for that Greek confidence vote," said Stewart Hall, senior currency strategist at Royal Bank of Canada.
In October, Canadian employers cut almost all the jobs gained in September as a sluggish economy led to layoffs in the manufacturing and construction sectors. [ID:nN1E7A3026]
"It is definitely suggesting the economy is slowing," said Sheryl King, head of Canadian economics at Bank of America-Merrill Lynch. "I don't think (the jobs report) is enough to get the Bank of Canada to cut (rates) at this point, but one or two more of these and there is a strong possibility that the bank could start reducing interest rates."
In the wake of the surprise job losses, the Canadian dollar CAD=D3 fell more than a cent to a session low of C$1.0229 to the U.S. dollar, or 97.76 U.S. cents, its weakest point in more than two weeks, before regaining a little ground.
It ended the North American session at C$1.0167 to the U.S. dollar, or 98.36 U.S. cents, below Thursday's North American close of C$1.0081 to the U.S. dollar, or 99.20 U.S. cents.
Overnight index swaps, which trade based on expectations for the central bank's key policy rate, showed that traders were pricing in a higher chance of a rate cut next year. BOCWATCH
However, a Friday poll of primary dealers showed they expect the Bank of Canada to hold its key policy rate - now at still stimulative 1 percent - where it is for an extended period rather than cut, though four of the 12 dealers have pushed back forecasts for the timing of the central bank's next move. [CA/POLL]
Separately, data showed U.S. hiring slowed in October but the unemployment rate hit a six-month low and job gains in the previous two months were stronger than thought, pointing to some improvement in the still-weak labor market. [ID:nN1E7A21ET]
But that news was overshadowed by the ongoing debt drama in Europe. Greek Prime Minister George Papandreou faced a vote of confidence late on Friday night, with the fate of the nation's deal on a euro zone debt bailout, and, perhaps, the global economy in the balance. [ID:nL6E7M4019]
RBC's Hall said the Greek vote and euro zone fallout could drive the Canadian dollar in either direction overnight.
"While the jobs numbers were important ... Greece has been steering the boat this week and it is still Greece that has its hands on the tiller, up until we find out what happens with this confidence vote," Hall said.
"We could see (the Canadian dollar) really going either way - supporting more positive for risk, or conversely changing to a risk-off if things get messy and there is greater uncertainty on the back of this confidence vote."
Canadian government bond prices were higher across the curve. The two-year bond CA2YT=RR rose 12.5 Canadian cents to yield 0.936 percent. The 10-year bond CA10YT=RR climbed 41 Canadian cents to yield 2.165 percent. (Editing by Jeffrey Hodgson and Peter Galloway)