The Canadian dollar strengthened on Friday against its U.S. counterpart as solid domestic jobs data tempered expectations for policy divergence between the Bank of Canada and the Federal Reserve.

The 15,300 increase in jobs in February easily topped economists' expectations for a gain of 2,500 and extended the labour market's recent strong run.      

"The good times keep on rolling for the Canadian labour market and the quality of employment also looks a little bit firmer this month," said Nick Exarhos, economist at CIBC Capital Markets.

U.S. employers hired workers at a robust pace in February, which could give the Fed the green light to raise interest rates next week.

The Bank of Canada will be slower to raise rates than the Fed but not as much as previously thought, said Hosen Marjaee, senior managing director of Canadian fixed income at Manulife Asset Management.

"We thought that the Bank [of Canada] may go [raise interest rates] some time early in 2018 but that may be brought a little bit closer."

The gap between Canadian and U.S. two-year yields narrowed 2.4 basis points to a spread of -51.6 basis points as expectations receded for policy divergence.

The Canadian dollar ended at $1.3463 to the greenback, or 74.28 cents US, stronger than Thursday's close of $1.3508, or 74.03 cents US. The range for the currency was $1.3421 to $1.3514.

Gains for the loonie came even as prices of oil, one of Canada's major exports, fell on oversupply concerns. U.S. crude prices settled 79 cents US lower at US$48.49 a barrel. 

U.S. Commerce Secretary Wilbur Ross said he hopes to launch formal talks to renegotiate the North American Free Trade Agreement in a little over three months.             

Canada sends about 75 per cent of its exports to the United States and could suffer badly if NAFTA is renegotiated or if a proposed border adjustment tax is implemented.             

Asked about potential repercussions if a tax were imposed, Prime Minister Justin Trudeau said his government would seek to protect the country's export jobs.                 

Speculators trimmed bullish bets on the Canadian dollar, data from the Commodity Futures Trading Commission showed. Canadian dollar net long positions dipped to 29,220 contracts as of March 7 from 30,090 a week earlier.     

Canadian government bond prices were mixed across a flatter yield curve, with the two-year down two cents to yield 0.843 per cent while the 10-year was flat to yield 1.813 per cent.