CANADA FX DEBT-C$ touches 2-1/2 month high on risk rally despite soft jobs data

(Adds strategist comment, closing figures, background)

* Canadian dollar at C$1.2937, or 77.30 U.S. cents

* Bond prices mixed across the maturity curve

TORONTO, Oct 9 (Reuters) - The Canadian dollar rallied against its U.S. counterpart on Friday, at one point touching its strongest level since late July, as investors took on more risk, relieved by indications of a more dovish U.S. Federal Reserve.

The currency surged to a session high immediately after data showed the Canadian economy created 12,100 jobs last month, but quickly pared gains as market participants digested the report, which included an unexpected rise in the unemployment rate to 7.1 percent.

“On the surface, it seemed like we beat estimates. ... A lot of full time jobs were lost, and part time jobs gained. So essentially not really strong,” said Hosen Marjaee, senior managing director of Canadian fixed income at Manulife Asset Management, noting that the loonie eventually recouped some of the lost ground.

The Canadian dollar ended the session at C$1.2937 to the greenback, or 77.30 U.S. cents, stronger than the Bank of Canada’s official close of C$1.3017, or 76.82 U.S. cents on Thursday.

The loonie, which has gained some 1.6 percent on the week, traded as strong as C$1.2901, a level not seen in nearly 2-1/2 months. It has advanced in seven of the last eight sessions, after slumping to C$1.3457, its weakest level in 11 years.

Global markets rallied after minutes from the Fed’s September policy meeting indicated the U.S. central bank was in no hurry to hike interest rates, given uncertainty in the global economy.

“One of the big factors over the last week has been the return to risk across the board,” said Margaee, noting in particular the 10 percent rally in the price of crude, a major Canadian export, since the beginning of October.

The loonie has closely tracked volatile crude prices over the last year.

Over the longer term, however, the Canadian dollar is not expected to strengthen much further, given the softening global economy, and an expected eventual rate hike by the Fed.

“I don’t think it has a lot of room. ... The euphoria may last a bit longer, maybe a few more days, one or two more cents,” said Margaee.

Canadian government bond prices were mixed across the maturity curve, with longer term bonds lower. The two-year price fell 1 Canadian cent to yield 0.560 percent and the benchmark 10-year slipped 13 Canadian cents to yield 1.519 percent.

The Canada-U.S. two-year bond spread was -8.1 basis points, while the 10-year spread was -57.1 basis points. (Editing by Jeffrey Benkoe and Richard Chang)