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OTTAWA, July 10 (Reuters) - Fewer Canadians lost their jobs in June than expected even as the unemployment rate hit an 11-year high, adding credence to the view that the economy is no longer in freefall and that the worst of the recession may be over.

Statistics Canada on Friday said net job losses in June totaled 7,400 and the unemployment rate rose to 8.6 percent from 8.4 percent in May -- the highest since February 1998.

Analysts surveyed by Reuters had expected a net employment decline of 35,000 last month and a jobless rate of 8.7 percent.

The news triggered a rise in the Canadian dollar and economist hailed the data as a positive surprise. However, the details of the report were more troubling, revealing that the only strength came from part-time employment and that the recession continued to bludgeon the manufacturing sector.

"On the overall number it's essentially flat, a small decline, but essentially flat, and in this environment flat is the new up so I think generally this is a good news story," said Craig Wright, chief economist at the Royal Bank of Canada.

But Doug Porter, deputy chief economist at BMO Capital Markets, said, "The good news such as it is stops at the headline."

"So it's not nearly as favorable results as the headline would suggest but one thing I would say is it's not the big disappointment we saw in the U.S.," he added.

The Canadian dollar CAD=CAD=D3 rose as high as C$1.1615 to the U.S. dollar, or 86.09 U.S. cents, from pre-data level around C$1.1652 to the U.S. dollar, or 85.82 U.S. cents.