CANADA FX DEBT-C$ strengthens as exports jump, oil rallies

* Canadian dollar at C$1.3012, or 76.85 U.S. cents
    * Bond prices lower across the maturity curve
    * Loonie touches its strongest since Tuesday at C$1.3012

    By Fergal Smith
    TORONTO, Sept 2 (Reuters) - The Canadian dollar strengthened
against its U.S. counterpart on Friday as domestic data showed a
jump in exports and oil rose, while a slowdown in U.S.
employment growth weighed on the greenback.
    Canada's trade deficit in July unexpectedly shrank to C$2.49
billion from a record C$3.97 billion in June as exports jumped
by 3.4 percent and imports stagnated, Statistics Canada data
    "This is definitely a breath of fresh air for Canadian
trade," said Doug Porter, chief economist at BMO Capital
Markets, who noted strength in export volumes and in non-energy
    The Bank of Canada has been counting on an uptick in
non-energy exports for the economy to meet its growth
projections. However, non-energy exports have been hampered this
year by weak U.S. business investment, while a weaker Canadian
dollar has not helped exports as much as expected. 
    The central bank will view the data "with great relief,"
Porter said.
    Still, he does not expect "big changes" at next week's Bank
of Canada interest rate decision.
    The Bank of Canada will likely keep interest rates unchanged
for even longer than had been anticipated as a lack of momentum
in the economy has prompted analysts to push their expectations
for a hike further back to 2018, a Reuters poll found.
    At 9:25 a.m. EDT (1325 GMT), the Canadian dollar 
was trading at C$1.3012 to the greenback, or 76.85 U.S. cents,
stronger than Thursday's close of C$1.3086, or 76.42 U.S. cents.
    The currency's weakest level of the session was C$1.3114,
while it touched its strongest since Tuesday at C$1.3012.
    U.S. crude prices were up 1.78 percent to $43.93 a
barrel as a report showing weaker U.S. jobs growth in August
suppressed the dollar, pushing up commodities. 
    The U.S. dollar dipped against a basket of major
currencies as U.S. employment growth slowed more than expected
in August after two straight months of robust gains and wage
growth moderated. The data could effectively rule out a rate
increase from the Federal Reserve this month.    
    Canadian government bond prices were lower across the
maturity curve, with the two-year bond down 4
Canadian cents to yield 0.585 percent and the benchmark 10-year
 falling 36 Canadian cents to yield 1.043 percent.
    The Canada-U.S. two-year bond spread narrowed 2.7 basis to
-20 basis points, while the 10-year spread was 2 basis points
narrower at -54.5 basis points as Canadian government bonds

 (Reporting by Fergal Smith; Editing by Meredith Mazzilli)