CANADA FX DEBT-C$ strengthens to 1-week high as greenback tumbles

* Canadian dollar at C$1.2940, or 77.28 U.S. cents
    * Loonie touched its strongest since May 26 at C$1.2916
    * Bond prices higher across the maturity curve

    By Fergal Smith
    TORONTO, June 3 (Reuters) - The Canadian dollar strengthened
to a one-week high against its broadly weaker U.S. counterpart
on Friday after a slowdown in U.S. jobs growth lowered chances
of an interest rate hike by the Federal Reserve, offsetting
disappointing domestic data.
    Canada's trade deficit in April narrowed to C$2.94 billion
($2.24 billion) from a record C$3.18 billion in March as exports
grew at a slightly faster rate than imports. 
    However, the volume increase in Canadian exports "was
slightly underwhelming," said Nick Exarhos, economist at CIBC
Capital Markets.
    Exarhos had been looking for a 0.3 percent gain in gross
domestic product for the month, but expects that forecast to be
    Still, the Bank of Canada has already signaled that the
economy may contract in the second quarter, impacted by
wildfires in Alberta that cut oil production. 
    "They (the Bank of Canada) will be keen on seeing what the
bounce is in the third quarter and what the effects of fiscal
stimulus is going to be," Exarhos said.
    A weaker currency would be welcomed by the central bank,
Exarhos added, while he expects one or two rate hikes by the Fed
to "act as a catalyst in weakening the Canadian dollar" despite
weaker than expected U.S. employment data on Friday.
    The U.S. economy created the fewest number of jobs in more
than five years in May, pointing to labor market weakness that
could make it difficult for the Fed to raise interest rates.
    At 9:49 a.m. EDT (1349 GMT), the Canadian dollar 
was trading at C$1.2940 to the greenback, or 77.28 U.S. cents,
much stronger than Thursday's close of C$1.3105, or 76.31 U.S.
    The currency's weakest level of the session was C$1.3105,
while it touched its strongest since May 26 at C$1.2916.
    Lower crude oil prices restrained gains for the
commodity-linked Canadian dollar. U.S. crude prices were
down 0.53 percent to $48.91 a barrel.
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 7 Canadian
cents to yield 0.525 percent and the benchmark 10-year
 rising 57 Canadian cents to yield 1.188 percent.
    The 10-year yield hit its lowest since April 7 at 1.175

 (Reporting by Fergal Smith; Editing by Nick Zieminski)