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CANADA FX DEBT-C$ ends firmer, touches 2-wk high on strong jobs

(Adds analyst comment, closing prices)

* C$ ends at C$0.9789, or $1.0216

* Canadian currency hits strongest level since Sept. 21

* Data reinforces Bank of Canada's hawkish tone

By Andrea Hopkins

TORONTO, Oct 5 (Reuters) - Canada's dollar ended firmer against its U.S. counterpart on Friday after touching a two-week high, boosted by much stronger-than-expected Canadian jobs data and a surprise drop in the U.S. unemployment rate.

The U.S. unemployment rate dropped to a near four-year low of 7.8 percent in September, while Canada added a thumping 52,100 jobs, almost all of them full-time, defying expectations and bolstering the Bank of Canada's case for an eventual interest rate rise.

"The key point here is the economy is still churning out jobs at a healthy pace," said Doug Porter, deputy chief economist at BMO Capital Markets. "The combination of figures is unambiguously positive for the Canadian dollar."

The Canadian dollar

ended the day at C$0.9789 to the greenback, or $1.0216, not far from its North American close on Thursday at C$0.9805, or C$1.0199. At one point it hit C$0.9735, its strongest level since Sept. 21.

A number of factors limited the currency's gains, including some skepticism that the Canadian economy is as robust as the employment numbers suggest, as well as weakening commodity markets, said Shaun Osborne, chief currency strategist at TD Securities.

"With commodity prices pulling back here, I think it's going to be a struggle for the Canadian dollar to do significantly better than highs we saw just a few weeks ago," he said.

"I'm a little skeptical that given what appears to be a fairly slow growth environment in the U.S. that Canada can continue to generate these rather stellar job numbers moving forward," Osborne added.

With investors shifting into riskier assets, Canadian government bond prices fell. The two-year bond

slipped 9.5 Canadian cents to yield 1.138 percent, while the benchmark 10-year bond

fell by 42 Canadian cents, to yield 1.807 percent.

Bond prices also fell as the data fueled expectations the Bank of Canada was more likely to tighten policy next year. A top official with the central bank reiterated the central bank's rate hike bias on Thursday.

Overnight index swaps, which trade based on expectations for the central bank's key policy rate, showed that traders increased bets on a rate hike in 2013 after the job reports.

"This positive Canadian jobs data will definitely put pressure on the Bank of Canada to raise rates sooner rather than later and maintain its hawkish tone towards raising rates," Rahim Madhavji from Knightsbridge Foreign Exchange wrote in a note to clients.

(Additional reporting by Alastair Sharp and Claire Sibonney; Editing by Jeffrey Hodgson and Leslie Gevirtz)

((Andrea.Hopkins@thomsonreuters.com)(416 941 8159)(Reuters Messaging: andrea.hopkins.thomsonreuters.com@reuters.net))

Keywords: MARKETS CANADA/DOLLAR BONDS