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* C$ rallies to 84.52 U.S. cents
* Touches highest level in nearly 4 months
* Move exaggerated in thin trade
* Bond prices lower ahead of U.S. data
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TORONTO, May 1 (Reuters) - The Canadian dollar shot higher versus the U.S. dollar on Friday as optimism the economy may be stabilizing convinced traders to buy currencies perceived as higher-risk.
The domestic currency rallied as high as C$1.1832 to the U.S. dollar, or 84.52 U.S. cents, which marked its highest level since Jan. 9.
The move higher added to gains recorded during the past two sessions, but Friday's trade was believed to be exaggerated given the thin and relatively volatile trading with some European markets closed for the May Day holiday.
At 9:05 a.m.. (1305 GMT) the Canadian unit was at C$1.1891 to the U.S. dollar, or 84.10 U.S. cents, up from C$1.1930 to the U.S. dollar, or 83.82 U.S. cents, at Thursday's close.
The Canadian dollar's run-up, however, appeared more a result of U.S. dollar weakness rather than any Canadian dollar specific fundamentals, like higher oil prices or upbeat domestic data.
Instead, with U.S. stock futures pointing to a higher open, on Friday on optimism the economic slump is waning, investors opted to snap up the currencies regarded as higher risk, like the Australian and Canadian dollars.
"Most of the other majors are higher against the (U.S.) dollar generally, so it's not really much Canada-specific today," said Adam Cole, global head of FX strategy at RBC Capital Markets in London. "So it's generally, mostly a (U.S.) dollar phenomenon more than a Canadian dollar phenomenon."
BOND PRICES LOWER
Canadian bond prices, with no domestic data to consider, were lower across the curve alongside the bigger U.S. Treasury market ahead of a monthly U.S. manufacturing report that could stir more optimism on the economic recovery there. [ID:nL114913]
"This is one of the more useful forward looking indicators and a very comprehensive peek at businesses. From that perspective, it's just really an important subset of the economy and a sign of economic health," said Eric Lascelles, chief economics and rates strategist at TD Securities.
With large debt issuance in the United States and Canada next week, supply concerns are also pressuring prices, strategists said.
The two-year Canada bond was largely flat, down 2 Canadian cents at C$100.53 to yield 0.993 percent, while the 10-year sank 24 Canadian cents to C$105.40 to yield 3.121 percent.
The 30-year bond pulled back 45 Canadian cents at C$119.40 to yield 3.862 percent. In the United States, the 30-year Treasury yielded 4.0880 percent. (Reporting by Jennifer Kwan and Frank Pingue; Editing by Kenneth Barry)