CANADA FX DEBT-C$ hits a 2-week low as trade deficit widens, greenback rallies

    * Canadian dollar at C$1.2611, or 79.30 U.S. cents
    * Loonie touches its weakest since July 20 at C$1.2638
    * Bond prices move lower across a steeper yield curve
    * Canada adds 10,900 jobs in July; trade deficit jumps in

    By Fergal Smith
    TORONTO, Aug 4 (Reuters) - The Canadian dollar weakened to a
two-week low against its U.S. counterpart on Friday after data
showed a jump in Canada's trade deficit, while a
stronger-than-expected U.S. jobs gain boosted the greenback.
     Canada's economy added 10,900 jobs in July, mostly in
full-time employment, Statistics Canada said, while the jobless
rate fell to its lowest level since October 2008.             
    But separate data showed Canada's trade deficit in June
swelled to C$3.60 billion from a revised C$1.36 billion
shortfall in May, with gold bullion leading the growth in
    "Typically, the market doesn't pay that much attention to
the trade data," said TD Securities senior rates strategist
Andrew Kelvin. "But this is an awfully big downside surprise"
    The U.S. dollar        rallied against a basket of major
currencies after U.S. employers hired more workers than expected
in July and raised their wages, signs of labor market tightness
that is likely to clear the way for the Federal Reserve to
announce a plan next month to start shrinking its massive bond
    At 9:12 a.m. ET (1312 GMT), the Canadian dollar          was
trading at C$1.2611 to the greenback, or 79.30 U.S. cents, down
0.2 percent.
    The currency's strongest level of the session was C$1.2554,
while it touched its weakest since July 20 at C$1.2638.
    For the week, the loonie has lost 1.4 percent. Still, it has
rallied more than 9 percent since early May, helped by the Bank
of Canada raising interest rates last month for the first time
in nearly seven years.
    Prices of oil, one of Canada's major exports, were on track
for weekly losses, weighed down by rising exports from the
Organization of the Petroleum Exporting Countries and strong
output from the United States.             
    U.S. crude        was up 0.08 percent at $49.07 a barrel.
    Canadian government bond prices were lower across a steeper
yield curve in sympathy with U.S. Treasuries. The two-year
           price fell 3 Canadian cents to yield 1.253 percent
and the 10-year             declined 24 Canadian cents to yield
1.921 percent.

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