CANADA FX DEBT-C$ notches strongest gain in 3 months on jobs data

    * Canadian dollar at C$1.2752, or 78.42 U.S. cents
    * Loonie climbs 1.1 percent
    * Canadian employment rises 79,500 in November
    * Bond prices lower across a flatter yield curve

    By Fergal Smith
    TORONTO, Dec 1 (Reuters) - The Canadian dollar posted its
biggest gain in nearly three months against its U.S. counterpart
on Friday, after stronger-than-expected domestic jobs data
fueled expectations for further Bank of Canada interest rate
hikes early next year.
    Canadian employment rose 79,500 in November, adding to
robust gains in 2017. The November increase was much stronger
than the 10,000 jobs gain that economists had expected, while
wage growth accelerated to 2.7 percent year-on-year from 2.4
    "The labor miracle in Canada continues," said Derek Holt,
head of capital markets economics at Scotiabank. "The broad
takeaway is the wage and price cycle continues to turn more
    Investors expect the Bank of Canada to leave its benchmark
interest rate steady at 1 percent at next week's policy
decision. But chances of a hike in January rose to nearly 60
percent from less than 50 percent before the data, the overnight
index swaps market indicated.           
    The central bank raised rates in July and September for the
first time in seven years but has since turned more cautious on
the outlook for the economy.
    Separate data showed that Canadian economic growth slowed to
1.7 percent in the third quarter, coming off a hot first half of
the year.             
    For September, the economy grew 0.2 percent, topping
expectations and suggesting modest momentum heading into the
fourth quarter.
    At 9:24 a.m. ET (1424 GMT), the Canadian dollar          was
trading at C$1.2752 to the greenback, or 78.42 U.S. cents, up
1.1 percent, its strongest gain since Sept. 6.
    The currency touched its strongest since Monday at C$1.2742.
    Adding to support for the loonie, U.S. crude        prices
were up 1.53 percent at $58.28 a barrel after major producers
agreed to continue reining in output until the end of next year.
    Oil is one of Canada's major exports.
    The U.S. dollar        edged higher against a basket of
major currencies even as a delay in voting on a Republican tax
overhaul kept investors on edge about its passage.             
    Canadian government bond prices were lower across a flatter
yield curve, with the two-year            price down 11.5
Canadian cents to yield 1.493 percent and the 10-year
            falling 27 Canadian cents to yield 1.918 percent.
    The gap between Canada's 2-year yield and its U.S.
equivalent narrowed by 6.1 basis points to a spread of -29.8
basis points. On Thursday, the spread had touched its widest in
five months at -35.9 basis points.

 (Reporting by Fergal Smith)