Loonie posts weekly decline as Canadian jobs data disappoints

(Adds dealer quotes and details throughout; updates prices)

* Canadian dollar weakens 0.5% against the greenback

* Touches its weakest since July 19 at 1.2984

* Canada's economy sheds 31,000 jobs in July

* 10-year yield falls 8.8 bps below U.S. equivalent

By Fergal Smith

TORONTO, Aug 5 (Reuters) - The Canadian dollar fell to a two-week low against the greenback on Friday as Canada's economy shed jobs for a second straight month in July, contrasting with a surge in U.S. hiring that could accelerate Federal Reserve interest rate hikes.

The loonie was trading 0.5% lower at 1.2935 to the greenback, or 77.31 U.S. cents, after touching its weakest level since July 19 at 1.2984. For the week, the currency was down 1.1%, its biggest weekly loss in seven weeks.

The divergence in this morning's employment figures between Canada and the U.S. is the main driver of CAD weakness today, said Tony Valente, senior FX dealer at AscendantFX.

The fact that the U.S. number beat (expectations) by such a large amount ... poured cold water on an early Fed pivot on the rates front.