CANADA FX DEBT-C$ firms as Wall Street rally offsets jobs plunge

(Adds analyst quotes and details throughout; updates prices)

* Canadian dollar at C$1.2596, or 79.39 U.S. cents

* Loonie touches its weakest since Dec. 27 at C$1.2690

* April rate hike chances slip to less than 50 percent

* Bond prices higher across a steeper yield curve

TORONTO, Feb 9 (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Friday, rebounding from an earlier six-week low, as gains for U.S. stocks offset the biggest decline in domestic jobs in nine years.

At 4 p.m. EST (2100 GMT), the Canadian dollar was

trading 0.1 percent higher at C$1.2596 to the greenback, or 79.39 U.S. cents. The currency's strongest level of the session was C$1.2561, while it touched its weakest since Dec. 27 at C$1.2690. "It has been a very volatile day with equity markets going up and down and FX has been mostly tracking that," said Daniel Katzive, head of FX strategy North America at BNP Paribas. U.S. stocks posted sharp gains on Friday, giving investors some solace after a week of huge swings that shook the market out of months of calm. Commodity-linked currencies, such as the Canadian dollar tend to underperform when stocks fall. For the week, the loonie retreated 1.3 percent. Still, speculators raised bullish bets on the Canadian dollar for the fifth straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Feb. 6, net long positions had risen to 40,164 contracts from 33,465 a week earlier. The decrease of 88,000 Canadian jobs was unexpected, against economists' forecasts for a gain of 10,000, and made for the biggest decline since January 2009. "The employment data wasn't so bad in the sense that the full-time employment was up a lot, so I think the market discounted that (the jobs data) pretty quickly," Katzive said. Full-time jobs rose 49,000. Last year, Canada's economy added jobs at the fastest pace since 2002. The data tempered expectations for further interest rate hikes from the Bank of Canada over the coming months. Chances of a hike in April slipped to less than 50 percent from 58 percent before the jobs report, data from the overnight index swaps market showed. The Bank of Canada last month raised its benchmark interest rate to 1.25 percent, its third hike since July. The price of oil, one of Canada's major exports, slid as U.S. futures fell below $60 a barrel for the first time since December on renewed concerns about rising crude supplies.

Canadian government bond prices were higher across a steeper

yield curve, with the two-year up 12 Canadian cents to yield 1.785 percent and the 10-year rising 18

Canadian cents to yield 2.352 percent.

(Reporting by Fergal Smith; Editing by Bernadette Baum and Lisa Shumaker)