REFILE-CANADA FX DEBT-C$ skids to 1-week low after jobs, housing data miss

* C$ hits session low of C$1.0037 vs US$, or $0.9963

* Bond prices rally, outperform Treasuries

* Canada’s economy sheds 21,900 jobs in January

TORONTO, Feb 8 (Reuters) - The Canadian dollar slid to its lowest level in more than a week on Friday after data showed Canada unexpectedly lost jobs in January and housing starts were much lower than forecast, spurring traders to reduce bets on an interest rate hike this year.

Canada’s economy shed 21,900 jobs last month, but a drop in the number of people seeking work pushed the unemployment rate down to a four-year low of 7.0 percent.

Market analysts had forecast a gain of 5,000 positions after strong job gains in three of the previous four months.

“Clearly the 300,000 jobs creation last year was unsustainable and we have to brace ourselves for something more sustainable this year,” said Stefane Marion, chief economist at National Bank Financial.

“You might have to reassess your growth expectations for the domestic economy this year, which means, in my view, that the Bank of Canada remains on the sideline through this year and no move before early 2014.”

Overnight index swaps, which trade based on expectations for the central bank’s key policy rate, showed that after the data traders lowered their already small bets on a rate hike in late 2013.

At 9:25 a.m. (1425 GMT), the Canadian dollar stood at C$1.0026 versus the greenback, or 99.74 U.S. cents, almost half a cent weaker than Thursday’s North American session close at C$0.9980, or $1.0020.

Following the jobs data, the currency hit a session low of C$1.0037 against the U.S. dollar, or 99.63 U.S. cents, its softest since Jan. 30. It was around $1.0006, or 99.94 U.S. cents immediately before the employment report.

The Canadian dollar was already on weaker ground after separate data earlier in the day showed domestic housing starts plunged last month.

Marion predicted that the Canadian dollar can weaken 3 or 4 more cents from current levels. “From a Canadian perspective what will really start to transpire over the next two months is the downshift in domestic demand, particularly the construction sector,” he added, noting the country’s cooling housing sector.

Canadian government bond prices rallied across the curve following the disappointing economic indicators, outperforming U.S. Treasuries.

The two-year bond was up 5 Canadian cents to yield 1.127 percent, and the benchmark 10-year bond gained 20 Canadian cents to yield 1.972 percent.