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CANADA FX DEBT-C$ hits 2-week low as oil falls, jobs data awaited

(Adds analyst quotes, details; updates prices)

* Canadian dollar at C$1.2581, or 79.48 U.S. cents

* Loonie touches its weakest since July 20 at C$1.2618

* Bond prices higher across a flatter yield curve

TORONTO, Aug 3 (Reuters) - The Canadian dollar weakened to a two-week low against its U.S. counterpart on Thursday as prices of oil, one of Canada's major exports, fell and investors braced for Canadian and U.S. jobs data on Friday.

U.S. crude oil settled 1.1 percent lower at $49.03 a

barrel, as cautious buying dried up near the $50 mark on concern about high crude supplies from the Organization of the Petroleum Exporting Countries. Other commodity-linked currencies, such as the Australian

and New Zealand dollars , also fell, extending this

week's losses. "There is some talk that China is expected to continue on with measures to pare back excess liquidity," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. China is a major consumer of commodities. Investors have also been booking profits, after gains for commodity-linked currencies over recent months, ahead of major economic data, Chandler said. Canadian and U.S. jobs data for July and domestic trade data for June are due on Friday. Losses for the loonie came as data showed Toronto home sales plummeted in July from a year earlier and prices were down nearly 19 percent from April peaks. A slowdown in the country's housing market could weigh on Canada's economy and reduce the number of additional interest rate increases from the Bank of Canada that the market expects, after the central bank hiked rates last month for the first time in nearly seven years. Economists expect the Bank of Canada to raise rates a further three times by the end of 2018.

At 4 p.m. EDT (2000 GMT), the Canadian dollar was

trading at C$1.2581 to the greenback, or 79.48 U.S. cents, down 0.1 percent. The currency's strongest level of the session was C$1.2553, while it touched its weakest since July 20 at C$1.2618. The loonie has rallied 9.6 percent since early May. Las week it touched week its strongest in more than two years at C$1.2414. But the recent upsurge will fade in coming months on prospects the Bank of Canada sounds less hawkish on rate hikes and fails to keep pace with the U.S. Federal Reserve, a Reuters poll found. Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries, after the Bank of England downgraded its economic and inflation forecasts. The

10-year rose 41 Canadian cents to yield 1.892

percent.

(Reporting by Fergal Smith; Editing by Nick Zieminski and James Dalgleish)