CANADA FX DEBT-C$ jumps to two-year high as rate hike chances climb

    * Canadian dollar at C$1.2398, or 80.66 U.S. cents
    * Touches its strongest level since June 2015 at C$1.2340
    * Bond prices lower across the yield curve
    * Two-year yield rises above U.S. equivalent

    TORONTO, Sept 1 (Reuters) - The Canadian dollar jumped to a
two-year high against its U.S. counterpart on Friday after
monthly U.S. job growth slowed more than expected and chances of
a Bank of Canada interest rate hike next week approached a coin
    The U.S. Labor Department said nonfarm payrolls rose by
156,000 in August, which should allow the Federal Reserve to
announce a plan to start trimming its massive bond portfolio
this month. But an anemic gain in wages may make the central
bank cautious about raising rates again this year.             
    In contrast, chances of a Bank of Canada rate hike as soon
as next week rose to nearly 50 percent. The probability was
around 20 percent before data on Thursday showed Canada's
economy expanding in the second quarter at its fastest pace in
nearly six years.
    At 9:32 a.m. ET (1332 GMT), the Canadian dollar          was
trading at C$1.2398 to the greenback, or 80.66 U.S. cents, up
0.7 percent.
    The currency's weakest level of the session was C$1.2492,
while it touched its strongest since June 2015 at C$1.2340.
    Gains for the loonie came even as oil prices slipped in the
wake of Hurricane Harvey, which has killed more than 40 people
and brought record flooding to the oil heartland of Texas,
paralyzing a quarter of the U.S. refining industry.             
    U.S. crude        prices were down 0.34 percent at $47.07 a
    Separately, Mexican Economy Minister Ildefonso Guajardo said
on Thursday that Mexico and Canada would remain in the North
American Free Trade Agreement even if the Trump administration
abandoned the accord.             
    Canada sends 75 percent of its exports to the United States
and could suffer badly if the United States quit NAFTA.
    Canadian government bond prices were lower across the yield
curve, with the two-year            price down 11 Canadian cents
to yield 1.335 percent and the 10-year             falling 46
Canadian cents to yield 1.903 percent.
    The two-year yield pushed above its U.S. equivalent for the
first time since May 2015, with the spread shifting 6.6 basis
points to 1.1 basis points. 

 (Reporting by Fergal Smith; Editing by Paul Simao)