* C$ hits highest point since May 2008
* Bonds sink across the curve
* Canada adds 69,200 jobs vs forecast 15,000
* U.S. payrolls up a meager 36,000 (Updates to market close)
By John McCrank
TORONTO, Feb 4 (Reuters) - The Canadian dollar powered to its highest level against the U.S. dollar since May 2008 on Friday after data showed that Canada produced far more jobs than expected in January, while U.S. job gains were tepid.
The currency rose as high as C$0.9832 to the U.S. dollar, or $1.0171 after Statistics Canada said the economy added 69,200 new positions, more than quadruple the 15,000 that markets had expected. [ID:nN04174016]
The unemployment rate, which had been forecast to remain unchanged, grew to 7.8 percent from 7.6 percent as more people entered the workforce.
In the United States, the data showed a rise of 36,000 jobs in January, far less than the 145,000 increase the market had expected, but the unemployment rate fell to its lowest level since April 2009.
The contrast was key to the Canadian dollar's outperformance of its U.S. counterpart, said David Watt, senior currency strategist at RBC Capital Markets.
"It took a fairly startling jobs number in order to beat the U.S. dollar, but we did manage to be the only currency to beat the U.S. dollar today," he said.
The Canadian dollar CAD=D4 closed at C$0.9884 to the U.S. dollar, or $1.0112. That was up from Thursday's North American close at C$0.9910 to the U.S. dollar, or $1.0091.
The modest U.S. jobs gain was at odds with other U.S. data for January, which had suggested employment growth was picking up, but severe snow storms that slammed large parts of the country may have been partly to blame for the weak figure. [ID:nLLA4DE7BA]
The weak U.S. headline number did not have a deep impact on the U.S. dollar, which allowed the Canadian dollar to strengthen on the back of Canada's own set of job figures and outperform all the other major currencies, said Camilla Sutton, chief currency strategist at Scotia Capital.
The strong Canadian data and the big drop in the U.S. unemployment rate fueled economic recovery hopes, weakening demand for safe-haven government debt and keeping Canadian bond prices in the red.
"The data raises the risk that the Bank of Canada could resume raising interest rates sooner than expected," said Sal Guatieri, senior economist at BMO Capital Markets.
Both Guatieri and RBC's Watt said that while that risk had increased, it was unlikely the central bank would move on rates in the near term.
The bank has said its main concerns regarding Canada's economic recovery are related to soft Canadian productivity, lackluster U.S. demand, and the strong Canadian dollar, said Watt.
"Well, it takes time for the productivity to change, the U.S. situation still remains challenging, and the Canadian dollar is still above parity," he said. "So I don't think the Bank of Canada is necessarily going to change how it is approaching monetary policy."
The two-year bond CA2YT=RR shed 17 Canadian cents to yield 1.857 percent, while the 10-year bond CA10YT=RR dropped 32 Canadian cents to yield 3.464 percent. (Additional reporting by Ka Yan Ng; editing by Rob Wilson)