CANADA FX DEBT-C$ jumps to two-year high as rate hike chances climb

* Canadian dollar at C$1.2398, or 80.66 U.S. cents

* Touches its strongest level since June 2015 at C$1.2340

* Bond prices lower across the yield curve

* Two-year yield rises above U.S. equivalent

TORONTO, Sept 1 (Reuters) - The Canadian dollar jumped to a two-year high against its U.S. counterpart on Friday after monthly U.S. job growth slowed more than expected and chances of a Bank of Canada interest rate hike next week approached a coin toss. The U.S. Labor Department said nonfarm payrolls rose by 156,000 in August, which should allow the Federal Reserve to announce a plan to start trimming its massive bond portfolio this month. But an anemic gain in wages may make the central bank cautious about raising rates again this year. In contrast, chances of a Bank of Canada rate hike as soon as next week rose to nearly 50 percent. The probability was around 20 percent before data on Thursday showed Canada's economy expanding in the second quarter at its fastest pace in nearly six years.

At 9:32 a.m. ET (1332 GMT), the Canadian dollar was

trading at C$1.2398 to the greenback, or 80.66 U.S. cents, up 0.7 percent. The currency's weakest level of the session was C$1.2492, while it touched its strongest since June 2015 at C$1.2340. Gains for the loonie came even as oil prices slipped in the wake of Hurricane Harvey, which has killed more than 40 people and brought record flooding to the oil heartland of Texas, paralyzing a quarter of the U.S. refining industry.

U.S. crude prices were down 0.34 percent at $47.07 a

barrel. Separately, Mexican Economy Minister Ildefonso Guajardo said on Thursday that Mexico and Canada would remain in the North American Free Trade Agreement even if the Trump administration abandoned the accord. Canada sends 75 percent of its exports to the United States and could suffer badly if the United States quit NAFTA. Canadian government bond prices were lower across the yield

curve, with the two-year price down 11 Canadian cents to yield 1.335 percent and the 10-year falling 46

Canadian cents to yield 1.903 percent. The two-year yield pushed above its U.S. equivalent for the first time since May 2015, with the spread shifting 6.6 basis points to 1.1 basis points.

(Reporting by Fergal Smith; Editing by Paul Simao)