By Solarina Ho TORONTO, Oct 11 (Reuters) - The Canadian dollar strengthened to a session high on Friday after Canadian employment figures came in stronger than expected, with the jobless rate falling below 7 percent for the first time in nearly five years. Canada added 11,900 jobs in September and the unemployment rate dropped to 6.9 percent, mostly due to fewer youths looking for work, Statistics Canada said. The gain surpassed the 10,000 new jobs forecast by economists. The jobless rate, which stood at 7.1 percent in August, touched the lowest since the 6.8 percent recorded in December 2008. The average monthly job growth over six months, seen as a more reliable gauge of the trend in the job market, was 23,100, compared with 12,300 in the previous six-month period. "It is slightly CAD positive. However, in the context of what was expected, combined with leading into a long weekend, combined with the event risk we have in both Washington but also with (Bank of Canada) Governor Poloz speaking this afternoon, it is unlikely to have a dramatic reaction," said Camilla Sutton, chief currency strategist for Scotiabank. The Canadian dollar was trading at C$1.0389 versus the greenback, or 96.26 U.S. cents at 8:56 a.m. (1256 GMT), stronger than just prior to the data's release and marginally stronger than Thursday's North American finish at C$1.0396, or 96.19 U.S. cents. The loonie touched its firmest level of the day earlier at C$1.0376, or 96.38 U.S. cents. Its performance was mixed against other major currencies ahead of Canada's Thanksgiving long weekend. At one point, it traded at its weakest level in more than five months against the New Zealand dollar and more than four months against the Australian dollar. In the United States, hopes that the standoff over the country's budget was coming to an end, helped lift the greenback. Fears of a possible U.S. debt default have damaged the credibility of the world's largest economy and hurt the dollar. Republican leaders and President Barack Obama seemed prepared to finalize a deal that would get the government back in operation. One Republican said an agreement could come on Friday, but hurdles remain. Government bond prices were higher across the maturity curve. The two-year bond rose 1 Canadian cent to yield 1.206 percent, while the benchmark 10-year bond rose 5 Canadian cents to yield 2.586 percent.