CANADA FX DEBT-C$ recovers from earlier 6-month low as jobs jump
* Canadian dollar at C$1.3204, or 75.73 U.S. cents * Loonie touches its weakest since Mar. 16 at C$1.3297 * Bond prices lower across the maturity curve By Fergal Smith TORONTO, Oct 7 (Reuters) - The Canadian dollar strengthened slightly against its U.S. counterpart on Friday, recovering from an earlier six-month low as domestic jobs data diminished prospects of a Bank of Canada interest rate cut. Canada's economy created 67,200 jobs in September, far more than expected, though that was fueled by the biggest increase in self-employed workers in more than seven years, data from Statistics Canada showed. "We were expecting some catch-up in this jobs report for September ... we got it, but the composition still looks a little weak," said William Adams, senior international economist at PNC Financial Services Group. "After solid job growth in September and other recent economic indicators also looking better, combined with benchmark oil prices over $50 a barrel ... we think another Canadian rate cut is quite unlikely," Adams said. The implied probability of a Bank of Canada rate cut by mid-2017 dipped to 15 percent, overnight index swaps data showed. It was nearly 50 percent before economic data one week ago showed the economy grew more than expected in July. U.S. employment growth unexpectedly slowed for the third straight month in September, which could make the Federal Reserve more cautious about raising interest rates. At 9:27 a.m. EDT (1327 GMT), the Canadian dollar was trading at C$1.3204 to the greenback, or 75.73 U.S. cents, slightly stronger than Thursday's close of C$1.3207, or 75.72 U.S. cents. The currency's strongest level of the session was C$1.3187, while it touched its weakest since March 16 at C$1.3297. U.S. crude prices were little changed, up 0.02 percent at $50.45 a barrel, as financial market confidence in the rally came up against a physical excess of crude. Strategists expect the Canadian dollar to strengthen over the coming year as higher oil prices provide support, but monetary policy divergence and U.S. election risk should restrain the currency in the near term, a Reuters poll found. Canadian government bond prices were lower across the yield curve, with the two-year down 2 Canadian cents to yield 0.592 percent and the benchmark 10-year falling 20 Canadian cents to yield 1.160 percent. The 10-year spread versus Treasuries narrowed by 2.7 basis points to -57.6 basis points as Canadian government bonds underperformed after the U.S. and Canadian jobs data. On Wednesday, the spread touched its widest in more than six months at -62.5 basis points. (Editing by Bernadette Baum)
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