CANADA FX DEBT-C$ rallies as jobs surge bolsters rate hike bets

TORONTO, Jan 6 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday, recouping its earlier decline, as investors raised bets on further tightening by the Bank of Canada after domestic data showed a huge jobs gain in December.

The Canadian economy gained 104,000 jobs last month, far exceeding analysts' forecasts of 8,000, while the jobless rate unexpectedly declined to 5%, Statistics Canada data showed.

Money markets see a 75% chance of a quarter-point interest rate hike by the BoC when it meets to decide on policy on Jan. 25, up from 64% before the data.

The Canadian dollar CAD= was trading 0.2% higher at 1.3540 to the greenback, or 73.86 U.S. cents, after trading in a range of 1.3523 to 1.3664. For the week, the currency was on track to edge 0.1% higher.

The gain for the loonie came as separate data showed the U.S. economy maintaining a strong pace of job growth in December but some easing in the annual rate of wage gains.

Adding to support for the loonie, U.S. crude CLc1 prices were up 2.1% at $75.25 a barrel, clawing back some of this week's decline. Oil is one of Canada's major exports.

Canada's dollar will rally this year, but much of the upswing will have to wait until a period of uncertainty passes for the domestic and global economies following aggressive tightening by central banks in 2022, a Reuters poll forecast.

Canadian government bond yields rose across a flatter curve on Friday. The 2-year CA2YT=RR climbed 3.9 basis points to 4.079%, while the 10-year CA10YT=RR was up one basis point at 3.191%.

(Reporting by Fergal Smith; Editing by Andrew Heavens)

((fergal.smith@thomsonreuters.com; +1 647 480 7446;))