CANADA FX DEBT-C$ firms as oil prices climb, U.S. wages disappoint

* Canadian dollar at C$1.2842, or 77.87 U.S. cents

* Oil prices rise 1.7 percent

* Canada's capacity utilization rises to 85.0 percent in Q3

* Bond prices mixed across the yield curve

TORONTO, Dec 8 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Friday, supported by higher oil prices and firm domestic data, while investors weighed a U.S. employment report that was tainted by a disappointing rise in wages.

The U.S. dollar pared some of its advance against a

basket of major currencies after the November jobs data, which showed a healthy 228,000 increase in non-farm payrolls but a weaker-than-expected annual wage gain of 2.5 percent.

Prices of oil, one of Canada's major exports, got a boost from rising Chinese crude demand and threats of a strike in Africa's largest oil exporter.

U.S. crude prices were up 1.7 percent at $57.64 a

barrel. Canada's capacity utilization rose to 85.0 percent in the third quarter, marking a 10-year high, as gains in the construction sector offset lower extraction volumes in the oil and gas industry. Separate data showed that Canadian housing starts rose sharply in November. The seasonally adjusted annual rate of starts climbed to 252,184 from October's downwardly revised 222,695.

At 9:24 a.m. ET (1424 GMT), the Canadian dollar was

trading at C$1.2842 to the greenback, or 77.87 U.S. cents, up 0.1 percent. The currency's strongest level of the session was C$1.2805, while it matched Thursday's low of C$1.2868, which was its weakest since Dec. 1. For the week, the loonie is on track to fall 1.2 percent, after the Bank of Canada left its benchmark interest rate on hold at 1 percent on Wednesday, and tempered expectations for a hike in the coming months. The central bank has insisted its interest rate decisions are data-dependent, yet analysts were puzzled this week when policy makers took a more cautious tone than strong domestic data would suggest. Canadian government bond prices were mixed across the yield

curve, with the two-year flat to yield 1.498 percent and the 10-year falling 10 Canadian cents to yield

1.868 percent.

(Reporting by Fergal Smith; Editing by Nick Zieminski)