CANADA FX DEBT-Canadian dollar rebounds from six-month low on jobs gain

By Fergal Smith

TORONTO, Oct 10 (Reuters) - The Canadian dollar rose against its U.S. counterpart on Friday as stronger-than-expected domestic jobs data reduced bets on another Bank of Canada interest rate cut this month, but the move was limited as oil prices declined.

The loonie CAD= was trading 0.2% higher at 1.3995 per U.S. dollar, or 71.45 U.S. cents, rebounding after it touched its weakest intraday level since April 10 at 1.4034.

For the week, the currency was on track to decline 0.3%, which would be its third straight weekly loss.

Canada's economy added 60,400 jobs in September, almost entirely reversing the losses of the previous month, while the unemployment rate held steady at 7.1%. Economists had forecast a 5,000 jobs gain.

"Overall, we would definitely characterize this as a solid and encouraging report," said Doug Porter, chief economist at BMO Capital Markets. "We've been leaning to a hold in late October. This somewhat helps that story but it's a close call."

Investors see a roughly 50% chance the BoC lowers interest rates at its next policy decision on October 29, down from 72% before the data. 0#CADIRPR

The central bank eased its benchmark rate by a quarter of a percentage point last month to 2.50%, its first cut since March, to support the economy which has been buffeted by trade uncertainty.

The price of oil CLc1, one of Canada's major exports, fell 2.6% to $59.92 a barrel as the market's risk premium faded after Israel and Hamas agreed to the first phase of a plan to end the war in Gaza.

Canadian government bond yields rose across much of a flatter curve. The 2-year CA10YT=RR was up 4.1 basis points at 2.518%, while the gap between it and the U.S. equivalent narrowed by 5.5 basis points to about 107 basis points in favor of the U.S. note.

That was the smallest gap since September 17. The bond market was set to close early ahead of the Thanksgiving Day holiday on Monday.