* Canadian dollar at C$1.2611, or 79.30 U.S. cents
* Loonie touches its weakest since July 20 at C$1.2638
* Bond prices move lower across a steeper yield curve
* Canada adds 10,900 jobs in July; trade deficit jumps in June
By Fergal Smith
TORONTO, Aug 4 (Reuters) - The Canadian dollar weakened to a two-week low against its U.S. counterpart on Friday after data showed a jump in Canada's trade deficit, while a stronger-than-expected U.S. jobs gain boosted the greenback.
Canada's economy added 10,900 jobs in July, mostly in full-time employment, Statistics Canada said, while the jobless rate fell to its lowest level since October 2008. separate data showed Canada's trade deficit in June swelled to C$3.60 billion from a revised C$1.36 billion shortfall in May, with gold bullion leading the growth in imports. the market doesn't pay that much attention to the trade data," said TD Securities senior rates strategist Andrew Kelvin. "But this is an awfully big downside surprise"
The U.S. dollar .DXY rallied against a basket of major currencies after U.S. employers hired more workers than expected in July and raised their wages, signs of labor market tightness that is likely to clear the way for the Federal Reserve to announce a plan next month to start shrinking its massive bond portfolio. 9:12 a.m. ET (1312 GMT), the Canadian dollar CAD=D4 was trading at C$1.2611 to the greenback, or 79.30 U.S. cents, down 0.2 percent.
The currency's strongest level of the session was C$1.2554, while it touched its weakest since July 20 at C$1.2638.
For the week, the loonie has lost 1.4 percent. Still, it has rallied more than 9 percent since early May, helped by the Bank of Canada raising interest rates last month for the first time in nearly seven years.
Prices of oil, one of Canada's major exports, were on track for weekly losses, weighed down by rising exports from the Organization of the Petroleum Exporting Countries and strong output from the United States. crude CLc1 was up 0.08 percent at $49.07 a barrel.
Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR price fell 3 Canadian cents to yield 1.253 percent and the 10-year CA10YT=RR declined 24 Canadian cents to yield 1.921 percent.