CANADA FX DEBT-C$ strengthens to 2-1/2-week high after jobs data

* C$ at C$1.0985 vs US$, or 91.03 U.S. cents
    * Canada adds higher-than-expected 29,400 jobs
    * U.S. adds lower-than-expected 113,000 jobs
    * Markets reduce bet on a Bank of Canada rate cut

    By Solarina Ho
    TORONTO, Feb 7 (Reuters) - The Canadian dollar rallied
nearly a cent on Friday to its strongest against the greenback
in more than two weeks after mixed North American jobs data,
which showed Canadian employers hired more workers than
forecast, while U.S. employers hired fewer than expected.
    The Canadian economy added 29,400 jobs after losing 44,000
jobs in December, while the unemployment rate fell to 7.0 from
7.2 percent, according to Statistics Canada. 
    This is the largest employment gain since August and beat
expectations of about 20,000 new hires. Full-time positions saw
its largest increase since last May. 
    "(It) dampens expectations of the possibility of the Bank of
Canada having to cut rates. But certainly with inflation
remaining low, there's no pressure to start moving rates
higher," said Paul Ferley, assistant chief economist at Royal
Bank of Canada.
    After the data, overnight index swaps, which trade based on
expectations for the central bank's policy rate, priced in a
lower expectation of an interest rate cut in March, when the
Bank of Canada will next announce its rate decision. 
    South of the border, the U.S. unemployment rate hit a new
five-year low of 6.6 percent, but only 113,000 workers were
hired, far lower than the 185,000 economists polled by Reuters
had expected. 
    This is the second straight month of weak hiring in the
United States, suggesting a loss of momentum in the economy,
which could be a problem for the Federal Reserve, which is
tapering its monthly bond-purchasing stimulus program.
    "The mix of these two reports today is quite friendly for
the Canadian dollar ... It's pretty much the sweet spot for the
Canadian dollar - almost the exact opposite of what we had last
month," said Doug Porter, chief economist at BMO Capital
    The Canadian dollar was trading at C$1.0985 to the
U.S. dollar, or 91.03 U.S. cents at around 9:25 a.m. (1425 GMT),
stronger than Thursday's close of C$1.1070, or 90.33 U.S. cents.
This is its strongest level since Jan. 22.
    The Canadian dollar, which was also outperforming other
major currencies, has strengthened more than 2 percent against
its U.S. counterpart since hitting a 4-1/2-year low last week.
    Canadian government bond prices were mixed across the
maturity curve, with the two-year off 4.5 Canadian
cent to yield 1.004 percent and the benchmark 10-year
 up 16 Canadian cents to yield 2.417 percent.