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CANADA FX DEBT-C$ snaps losing streak as jobs boom clips rate cut bets

data showing U.S. employers added fewer workers than expected

(Adds details throughout and updates prices)

* Loonie touches its strongest since July 31 at 1.3159

* Currency ends seven-week losing streak

* Canada's economy adds 81,100 jobs in August

* Canada-U.S. 2-year spread hits narrowest since October 2017

TORONTO, Sept 6 (Reuters) - The Canadian dollar strengthened to a five-week high against its U.S. counterpart on Friday as domestic data showing a bigger-than-expected jobs gain in August reduced investor expectations for a Bank of Canada interest rate cut next month. Canada's economy added 81,100 jobs in August, largely driven That was much more than the 15,000 increase that analysts had expected. "If the Bank of Canada was on the fence about cutting rates in October, today's jobs numbers might be one further push towards standing pat," Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note. Chances of a cut at the Bank of Canada's next interest rate decision on Oct. 30 fell to 22% from 28% before the data, the overnight index swaps market indicated. They were nearly 70% before Wednesday's interest decision, which showed no indication that the central bank was planning to cut rates despite easing this year by many of its global peers, including the U.S. Federal Reserve. Ivey Purchasing Managers Index data was also upbeat, showing that the pace of economic activity in Canada picked up in August as inventories climbed.

At 3:05 p.m. (1905 GMT), the Canadian dollar was

trading 0.4% higher at 1.3172 to the greenback, or 75.92 U.S. cents. The currency touched its strongest level since July 31 at 1.3159. For the week, it was up 1.0%, its first advance since the first half of July. Gains for the loonie came as the U.S. dollar was pressured in August and as Federal Reserve Chair Jerome Powell promised the central bank will continue to act "as appropriate" to sustain an economic expansion. Powell's comments helped boost the price of oil, one of

Canada's major exports. U.S. crude oil futures settled

0.4% higher at $56.52 a barrel. Canadian government bond prices were lower across a flatter

yield curve, with the two-year down 7 Canadian centsto yield 1.492% and the 10-year falling 15 Canadian

cents to yield 1.281%. The gap between Canada's two-year yield and its U.S. equivalent narrowed 4.8 basis points to a spread of -4.0 basis points, its narrowest gap since October 2017.

(Reporting By Tom Brown)