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* Canadian dollar at C$1.3126, or 76.18 U.S. cents
* Loonie touches its weakest level since July 25 at C$1.3152
* Bond prices rise across a flatter yield curve
* Canada-U.S. 2-year spread hits narrowest mark since May 31
By Fergal Smith
TORONTO, Aug 10 (Reuters) - The Canadian dollar weakened to a more than two-week low against the greenback on Friday as the threat of an economic crisis in Turkey spreading to other countries rattled global financial markets, offsetting stronger-than-expected domestic jobs data.
A plunge in the Turkish lira rocked global equities and emerging markets (EM) and fear of more turmoil sent investors scurrying for safety in assets like the yen and U.S. government bonds. EM contagion is really what's driving the bus," said Alvise Marino, FX strategist at Credit Suisse (SIX:CSGN) in New York. "It (the Canadian dollar) is just reacting to the general risk-off that you are seeing across FX."
Canada exports many commodities and runs a current account deficit so its economy could be hurt if the flow of trade or capital slows.
The country unexpectedly added 54,100 jobs in July and the unemployment rate dipped to equal a record low 5.8 percent, but analysts said the data was weaker than it appeared.
"The growth numbers were good but the pullback in earnings gave people some pause," Marino said.
Average hourly wages rose by 3.0 percent from a year earlier, its smallest annual gain since December.
At 3:41 p.m. EDT (1941 GMT), the Canadian dollar CAD=D3 was trading 0.6 percent lower at 1.3126 to the greenback, or 76.18 U.S. cents. The currency touched its weakest level since July 25 at C$1.3152.
The loonie, which has been buffeted in recent days by a diplomatic row between Saudi Arabia and Canada, was on track to fall 1 percent for the week, its biggest decline since June.
Speculators cut bearish bets on the Canadian dollar for the fourth straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Aug. 7, net short positions had fallen to 24,898 contracts from 31,569 a week earlier.
U.S. crude oil futures CLc1 settled 1.2 percent higher at $67.63 a barrel but were still lower for the week. Oil is one of Canada's major exports. O/R
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR rose 3.5 Canadian cents to yield 2.097 percent and the 10-year CA10YT=RR climbed 36 Canadian cents to yield 2.292 percent.
The gap between Canada's 2-year yield and its U.S. counterpart narrowed by 3.1 basis points to a spread of 50.7 basis points in favor of the U.S. bond, its narrowest since May 31.