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* C$ ends at C$0.9867 vs US$, or $1.0135 * Bond prices mixed across the curve By Claire Sibonney TORONTO, Aug 16 (Reuters) - The Canadian dollar rose to its strongest level in more than three months against its U.S. counterpart and a record peak versus the euro on Thursday after German Chancellor Angela Merkel voiced support for the European Central Bank's crisis-fighting strategy. The comments by Merkel, made on a visit to the Canadian capital Ottawa, spurred a rally in riskier assets. Merkel said a declaration by European Central Bank chief Mario Draghi last month to do whatever was necessary to save the euro was "completely in line" with the approach taken by European leaders. Merkel's remarks raised the prospect the ECB might soon buy the sovereign debt of Spain, Italy and other debt-laden euro zone members whose high borrowing costs could become crippling. Lackluster U.S. data on Thursday, including soft weekly data on the labor market and a regional factory gauge, also left the door open to more monetary stimulus from the U.S. Federal Reserve. "It's generally a buy North America or sell North America story in terms of the big swings in the FX markets," said Shaun Osborne, chief currency strategist at TD Securities. Osborne said the Canadian currency, in particular, was boosted on higher interest rate expectations for the country and its superior fiscal position, reflected by a Moody's report on Thursday that reaffirmed Canada's AAA ratings. The Canadian dollar ended the North American session at C$0.9867 against its U.S. counterpart, or $1.0135, firmer than Wednesday's North American session close at C$0.9890, or $1.0111. The Canadian dollar hit its highest intraday level against the greenback since May 3. Osborne said in the short term, Canada's currency could strengthen to the C$0.9800 area. The Canadian dollar was still seen outperforming most major currencies on the crosses. It hit a record high against the euro at C$1.2121, or 82.50 U.S. cents. Against the Australian dollar, Canada's currency reached its strongest level in one month. Looking ahead to Friday, investors will focus on domestic inflation figures for July. Canadian inflation is forecast to have remained tame in the month, with the annual core rate coming in right on the Bank of Canada's 2 percent target, and likely having little influence on the bank's early September interest rate decision. Canadian bond prices were mixed across the curve, but still outperformed U.S. Treasuries. The two-year bond edged up half a Canadian cent to yield 1.244 percent, and the benchmark 10-year bond fell 10 Canadian cents to yield 1.965 percent.