* Canadian dollar at C$1.2735, or 78.52 U.S. cents
* Loonie touches its strongest since Oct. 25 at C$1.2716
* Canadian jobs rise 35,300 in October
* Bond prices lower across the yield curve
By Fergal Smith
TORONTO, Nov 3 (Reuters) - The Canadian dollar strengthened to a nine-day high against its U.S. counterpart on Friday after stronger-than-expected domestic jobs data supported the case for further interest rate increases from the Bank of Canada next year.
Canada's economy added 35,300 jobs in October on gains in full-time employment, while wages posted their biggest gain in 18 months. Analysts had expected the economy to add 15,000 job. jobs data looks pretty good, with full-time employment way up again," said Andrew Kelvin, senior rates strategist at TD Securities.
"What we have seen in the labor data does support tighter (monetary) policy at some point next year and perhaps sooner than later."
Perceived chances of another rate hike by March rose to 88 percent from 77 percent before the data, the overnight index swaps market indicated. BOCWATCH
The central bank hiked rates in July and September for the first time in seven years, but has turned more dovish since September.
At 9:23 a.m. ET (1323 GMT), the Canadian dollar CAD=D4 was trading at C$1.2735 to the greenback, or 78.52 U.S. cents, up 0.6 percent.
The currency's weakest level of the session was C$1.2835, while it touched its strongest since Oct. 25 at C$1.2716.
Adding to support for the loonie, oil prices neared their highest levels in more than two years, with buyers attracted by expectations of an extension to a global pact to cut output that has reduced oversupply. is one of Canada's major exports.
In separate data, Canada's trade deficit in September was essentially unchanged at C$3.18 billion as both imports and exports dropped for the fourth consecutive month. U.S. dollar .DXY edged lower against a basket of major currencies. U.S. job growth accelerated in October after hurricane-related disruptions hurt employment in September, but there were signs that labor market momentum was slowing as annual wage gains sharply retreated. government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 5.5 Canadian cents to yield 1.44 percent and the 10-year CA10YT=RR falling 8 Canadian cents to yield 1.968 percent.
The gap between Canada's 2-year yield and its U.S. equivalent narrowed by 2.4 bps to a spread of -17.7 basis points.