* Canadian dollar at C$1.2765, or 78.34 U.S. cents
* Loonie touches its strongest since Oct. 25 at C$1.2716
* Speculators cut bullish bets on loonie
* Bond prices mixed across flatter 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, while wages posted their biggest gain in 18 months. Analysts had expected the economy to add 15,000 jobs. we have seen in the labor data does support tighter (monetary) policy at some point next year and perhaps sooner than later," said Andrew Kelvin, senior rates strategist at TD Securities.
The solid employment report contrasted with trade data which showed exports falling for the fourth consecutive month.
"People took the job report as being more of a factor for the bank," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
Perceived chances of another rate hike by the Bank of Canada by March rose to 84 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.
Speculators have cut bullish bets on the loonie, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Oct. 31, Canadian dollar net long positions had slipped to 57,839 contracts from 72,332 a week earlier.
At 4 p.m. EDT (2000 GMT), the Canadian dollar CAD=D4 was trading at C$1.2765 to the greenback, or 78.34 U.S. cents, up 0.3 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. For the week, it rose 0.4 percent.
Adding to support for the loonie, U.S. crude prices touched a two-year high after rig data suggested drilling in the United States would throttle back. is one of Canada's major exports.
The U.S. dollar .DXY rose against a basket of major currencies after the release of U.S. factory orders and services sector data that beat estimates offset an underwhelming October jobs report. government bond prices were mixed across a flatter curve, with the two-year CA2YT=RR down 5.5 Canadian cents to yield 1.44 percent and the 10-year CA10YT=RR rising 2 Canadian cents to yield 1.956 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.