* C$ touches high of 96.86 U.S. cents
* Canada adds 93,200 jobs in June
* Bond prices fall across the curve
TORONTO, July 9 (Reuters) - The Canadian dollar surged against the greenback and bond yields shot higher on Friday after the highly anticipated domestic jobs report for June far surpassed expectations and solidified the view the Bank of Canada will raise interest rates again this month.
The Canadian dollarjumped more than a cent to touch a session high of C$1.0324 to the U.S. dollar, or 96.86 U.S. cents, its strongest level since June 28.
Canadian employment surged by 93,200 in June, contradicting other recent data suggesting the country's galloping economic recovery was slowing. [ID:nN09262340]
Analysts, in a Reuters poll, predicted an increase of 15,000 jobs after a moderate gain in May of 24,700 positions.
"This is a blockbuster of a job report," said Eric Lascelles, chief Canada macro strategist at TD Securities.
"There is a lot of strength from top to bottom, and so clearly this is very bond bearish, it is Canadian dollar positive, and it argues for hikes not just in July, but arguably beyond."
The employment report represented the final key report ahead of the July 20 Bank of Canada rate decision.
Yields on overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, showed the market sees an 87 percent chance of a July rate hike.
Immediately before the data, investors priced in a 68 percent chance.
At 8:04 a.m. (1204 GMT), the Canadian dollar was at C$1.0340 to the U.S. dollar, or 96.71 U.S. cents, up from Thursday's finish at C$1.0440 to the U.S. dollar, or 95.79 U.S. cents.
The next target was at the 100-day moving average at C$1.0302, traders said.
"All things being equal, it would probably tip the scales for another hike in July, but I think right now it's almost like a game of Sudoku," said Tom Nakamura, a fixed-income portfolio manager at AGF Investments.
"(The) global backdrop is what the Bank of Canada is concerned about for Canada looking forward. So we'll have to weigh that against continued strength in the domestic economy."
Recent nervousness over European bank stress tests, monetary policy tightening in China and weakness in the U.S. economy have fanned concerns of a global recession again.
But with a near-term rate hike priced in, Canadian bond prices slumped across the curve.
The two-year government bondsank 26 Canadian cents to yield 1.757 percent, while the 10-year bond shed 55 Canadian cents to yield 3.261 percent.
"Canadian yields are definitely edging higher here, led by the front end, as you might expect," added Nakamura.
"That would be the normal reaction to the data, a flattening of the yield curve ... this could probably continue a bit further, but then we'll have to take our cue from developments next week." (Additional reporting by John McCrank; editing by Jeffrey Benkoe)
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