CANADA FX DEBT-C$ weakens to 1-week low; Fed rate bets offset firm jobs data

* Canadian dollar at C$1.3006, or 76.89 U.S. cents
    * Loonie touches its weakest since Sept. 2 at C$1.3016
    * Canadian bond prices lower across steeper maturity curve
    * 10-year yield reaches its highest in five weeks at 1.142

    By Fergal Smith
    TORONTO, Sept 9 (Reuters) - The Canadian dollar weakened to
a one-week low against its U.S. counterpart on Friday as a drop
in oil prices and increased bets on an impending interest-rate
increase by the Federal Reserve offset stronger-than-expected
domestic jobs data.
    Canada's economy added 26,200 jobs in August, recovering
some of the positions lost in recent months on increased hiring
in the construction and service sectors, data from Statistics
Canada showed. Economists had forecast a gain of 15,000 jobs.
    "I don't know that it should change anyone's broader opinion
on the Canadian economy, but it's still encouraging," said
Andrew Kelvin, senior rates strategist at TD Securities.
    The implied probability of a Bank of Canada interest rate
cut this year was little changed after the data at around 10
percent, overnight index swaps data showed.    
    U.S. crude was down 1.83 percent at $46.75 a barrel.
It was still set for its first weekly gain in three weeks,
though, after Russia and Saudi Arabia agreed to work together to
help rebalance the markets and after a surprisingly large
drawdown in U.S. crude stocks. 
    The U.S. dollar rose against a basket of major
currencies as the probability of a Fed rate hike in September
climbed to 33 percent from 18 percent on Thursday, according to
CME Group's FedWatch tool.
    The increased probability of a U.S. rate hike came after the
European Central Bank on Thursday kept its already loose policy
stance unchanged and the Chicago Council on Global Affairs
indicated Fed board member Lael Brainard would speak on Monday.
    At 9:21 a.m. EDT (1321 GMT), the Canadian dollar 
was trading at C$1.3006 to the greenback, or 76.89 U.S. cents,
weaker than Thursday's close of C$1.2928, or 77.35 U.S.
    The currency's strongest level of the session was C$1.2912,
while it touched its weakest since Sept. 2 at C$1.3016.
    Losses for the loonie came after a more dovish-than-expected
statement from the Bank of Canada on Wednesday. The central bank
warned that the economy could be weaker than it anticipated just
two months ago as exports disappointed. 
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries. The two-year
 fell 1.5 Canadian cents to yield 0.577 percent, and
the benchmark 10-year declined 42 Canadian cents to
yield 1.129 percent.
    Earlier on Friday, the 10-year yield touched its highest
since Aug. 4 at 1.142 percent.

 (Reporting by Fergal Smith; Editing by Lisa Von Ahn)