CANADA FX DEBT-C$ rallies as dismal U.S. data casts doubt on Fed hike; oil up

(Updates with strategist comment, details, closing figures)
    * Canadian dollar at C$1.3164 or 75.96 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, Oct 2 (Reuters) - The Canadian dollar surged to its
strongest level in two-weeks against the U.S. dollar on Friday
following dismal U.S. labor market data that raised fresh doubts
about whether the economy was ready for an interest rate hike
this year.
    Oil prices that turned sharply higher following a report
that showed U.S. oil rig count declined for the fifth week also
helped give the loonie a bump.
    U.S. payrolls excluding farming climbed by 142,000 in
September, well below the 203,000 economists polled by Reuters
had predicted. August figures, already below forecast, were
revised sharply lower. 
    The disappointing numbers sent the greenback down sharply,
at one point hitting a two-week low, against a basket of key
currencies including the loonie. 
    "It's a confluence of a weaker U.S. dollar, which is across
the board, but also the rebound we've seen in commodities...That
has helped underpin some momentum in CAD," said David Tulk,
chief Canada macro strategist at TD Securities in Toronto.
    The Canadian dollar ended at C$1.3164 to the
greenback, or 75.96 U.S. cents, firmer than the Bank of Canada's
official close of C$1.3255, or 75.44 U.S. cents on Thursday.
    The currency, which had stumbled to fresh 11-year lows
earlier this week - touching C$1.3457 at one point on Tuesday,
was up some 1.2 percent on the week.
    "It was rarified air, when you're up towards C$1.34. There
were some sellers hanging out there and there were some
technical factors," said Tulk, but added that the longer term
trend was still for a weaker loonie.
    Federal Reserve officials have been signaling that they
planned to raise interest rates for the first time in nearly a
decade by the end of the year, but Friday's weak employment
numbers could fuel concerns that a global economic slowdown will
hurt the U.S. economy. 
    TD has been calling for March 2016 hike, said Tulk.
    Looking ahead to next week, August trade data and Ivey PMI
figures for Canada are due next Tuesday, while Canadian jobs
data for September and the Bank of Canada's business outlook
survey will be released next Friday. 
    Canadian government bonds were underperforming U.S.
Treasuries, with the Canada-U.S. two-year bond spread narrowing
to 7.60 basis points and the 10-year spread narrowing to 58.1
basis points.
    Canadian government bond prices were mostly across the
maturity curve, with the two-year price up 4.5
Canadian cents to yield 0.505 percent and the benchmark 10-year
 rising 25 Canadian cents to yield 1.400 percent.

 (Reporting by Solarina Ho; Editing by Nick Zieminski)