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TORONTO (Reuters) - The Canadian dollar closed little changed against its U.S. counterpart on Thursday after briefly touching a six-week high, as a dip in oil prices offset the impact of encouraging Canadian manufacturing data and easing fears about Europe's debt crisis.
Canada's currency was unable to match gains made by the euro and global equities markets, which rose after solid European bond auctions increased hopes the crisis there is fading, while strong U.S. jobs data bolstered Wall Street.
The Canadian dollar gave back its early gains as U.S. crude futures fell, pressured by continuing weak demand and technical resistance. Canada is a major exporter of oil.
"We've run into U.S.-dollar buyers just because we hit the strong-end of the range and energy prices are down," said Shane Enright, executive director of foreign exchange sales at CIBC World Markets.
Weaker gold prices also hurt. Gold fell as tame U.S. inflation data prompted bullion investors to take profits after a three-day rally pushed prices to their highest levels since mid-December.
The Canadian dollar finished at C$1.0114 to the U.S. dollar, or 98.87 U.S. cents, down slightly from Wednesday's finish at C$1.0112 to the U.S. dollar, or 98.89 U.S. cents.
The currency hit a six-week high at C$1.0071 to the U.S. dollar, or 99.29 U.S. cents, after Canadian manufacturing data showed sales rebounded in November to their highest level since October 2008.
Data showing the number of Americans filing for new jobless benefits dropped to a near four-year low last week also boosted investor sentiment.
The Canadian dollar has been unable to return to the one-for-one level with the greenback for any length of time since September, despite numerous attempts. Analysts said it could struggle to break out of its recent trading range anytime soon.
"Each month we've tried to push towards parity and stalled," said Enright. "Even if it breaks through there we still have clients looking to sell Canada and buy U.S. closer to parity."
However the volatile market conditions which helped strengthen the U.S. currency in the latter half of 2011 have eased, helping the euro and Canadian dollar make up ground.
"The U.S. dollar was the beneficiary in 2011 of a risk-off trade and commodity prices weakening," said Paul Taylor, chief investment officer at BMO Harris. "But on a relative basis Canada fiscally looks a lot stronger than the U.S. and investors will continue to focus on that as we go forward. So maybe we go through parity, but just modestly so."
Europe remains a wildcard, and investors are focused on every development in the region's sovereign debt crisis.
On Thursday, Spain passed its biggest test of market sentiment so far this year, selling more longer-term debt than hoped, while France raised almost 9.5 billion euros in its first bond auctions since Standard & Poor's stripped the country of its AAA rating last Friday.
Still, Greek default fears weighed after reports there had been little progress in this week's ongoing talks on a bond swap deal.
Canadian government bond prices were mostly down, with the two-year bond falling 9 Canadian cents to yield 1.035 percent. The 10-year bond dropped 42 Canadian cents to yield 2.01 percent.
($1 = $1.01 Canadian)
Editing by Jeffrey Hodgson