CANADA FX DEBT-Canadian dollar posts biggest decline in six weeks on downbeat jobs data

By Fergal Smith

TORONTO, March 13 (Reuters) - The Canadian dollar weakened to a 10-day low against its U.S. counterpart on Friday, as investors trimmed bets on Bank of Canada interest rate hikes this year after domestic data that showed a surprise sharp decline in employment.

The loonie CAD= was trading 0.7% lower at 1.3730 per U.S. dollar, or 72.83 U.S. cents, after touching its weakest intraday level since March 3 at 1.3741.

It was the biggest decline for the currency since January 30. For the week, the currency lost 1.2%.

"The CAD is sliding into the weekend, reflecting a combination of anxiety about the developments in the Middle East on the one hand and much weaker than expected Canadian employment data on the other," Shaun Osborne and Eric Theoret, strategists at Scotiabank, said in a note.

Canada's economy shed 83,900 jobs in February and the unemployment rate rose to 6.7%. Economists had forecast a jobs gain of 10,000.

The Bank of Canada is forecast to keep its overnight rate on hold at 2.25% next week and for the rest of this year, for now looking through inflation risks from the Middle East war, according to most economists in a Reuters poll.

Money markets have priced in 42 basis points of tightening this year, down from 44 basis points before the data. 0#CADIRPR

Safe-haven demand helped the U.S. dollar .DXY notch its second consecutive weekly gain against a basket of major currencies, while the price of oil CLc1 settled 3.1% higher at $98.71 a barrel as the Strait of Hormuz remained closed. Oil is one of Canada's major exports.

Canadian bond yields moved lower across the curve. The 10-year CA10YT=RR was down 1.7 basis points to 3.519%, after earlier touching its highest level since July 25 at 3.544%.