By Fergal Smith
TORONTO (Reuters) - The Canadian dollar climbed to a 10-day high against its U.S. counterpart on Friday as the greenback gave back some of its recent gains, but the loonie's advance was capped by weaker-than-expected domestic employment data.
The loonie was trading 0.5% higher at 1.3030 to the greenback, or 76.75 U.S. cents, after touching its strongest since Aug. 30 at 1.2983.
Still, that was the smallest advance among G10 currencies. For the week, the loonie was up 0.8%, after posting declines in the three previous weeks.
Canada's economy shed 39,700 jobs in August, which was the third straight month of declines and missed analyst estimates for an increase of 15,000.
"We doubt this number is the catalyst to instigate CAD weakness, but it may start to kick off the domino effect of bad news," strategists at TD Securities, including Mazen Issa, said in a note. "It may take another month or so, but it does seem like CAD rallies have a short shelf life."
After the jobs data, money markets dialed back the amount of additional tightening expected from the Bank of Canada by the end of the year to 49 basis points from 58 basis points.
On Wednesday, the central bank hiked its benchmark interest rate to a 14-year high of 3.25%.
Wall Street extended this week's gains and the safe-haven U.S. dollar retreated from Wednesday's peak against a basket of major currencies as attention turned to a U.S. inflation report next week.
The price of oil, one of Canada's major exports, settled 3.9% higher at $86.79 a barrel.
Canadian government bond yields were lower across the curve, with the 10-year down 4.6 basis points at 3.149%. It fell 8.5 basis points further below the U.S. 10-year rate to a gap of 18.2 basis points.
(Reporting by Fergal Smith; editing by Jonathan Oatis and Deepa Babington)