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TORONTO (Reuters) - The loonie rose nearly 1 percent against the U.S. dollar on Thursday, thanks to a combination of lofty commodity prices and expectations for a solid domestic jobs report to cap off the week.
Domestic bond prices, with no Canadian data to consider, ended mixed, given a pair of contrasting U.S. data reports.
The Canadian dollar closed at C$1.0044 to the U.S. dollar, or 99.56 U.S. cents, up from C$1.0136 to the U.S. dollar, or 98.66 U.S. cents, at Wednesday's close.
A big chunk of the currency's gain came late in the session when it rallied to C$1.0028 to the U.S. dollar, or 99.72 U.S. cents. That was its highest level two weeks and paved the way for its biggest percent gain in a session since late February.
Backing the gain was a rise in gold prices above $900 an ounce, and oil prices that stuck close to recent high levels, despite a drop on Thursday.
Comments from Federal Reserve Chairman Ben Bernanke, who seemed less pessimistic than anticipated about the U'S. economy, also offered the Canadian currency some support as Canada relies heavily on its exports to the United States.
"It partly reflects the better bid in commodity prices and a sense that perhaps the worst is over for the U.S. economy," said Sal Guatieri, senior economist at BMO Capital Markets.
"We've seen a consistent pattern of Canadian job numbers outperforming U.S. figures so maybe the market is getting ahead of that and pricing a repeat tomorrow morning."
March jobs data for Canada and the United States will be released early on Friday. The domestic report, which follows a gain of 43,300 jobs in the previous month, is expected to show the economy added 13,500 jobs, according to Reuters Estimates.
The latest head of steam behind the Canadian dollar, which has rallied for three straight sessions, has put it back within striking distance of parity with the greenback. It has not traded above par since March 19.
Canadian bond prices turned lower on the short end of the curve but rallied on the long end after economic data out of the United States painted two different pictures.
One piece of data showed a surprisingly big jump in weekly jobless claims and renewed worries that the U.S. economy may be in, or on the brink of, recession. But price gains were capped in a report that showed the U.S. services sector contracted less than expected in March.
But the market moves were possibly exaggerated in thin trade ahead of important economic data due from both sides of the border in the week's final session.
"Markets have been thin ahead of the key employment releases tomorrow," said Guatieri.
The two-year bond fell 30 Canadian cents to C$101.87 to yield 2.847 percent. The 10-year bond climbed 20 Canadian cents to C$103.13 to yield 3.594 percent.
The yield spread between the two- and 10-year bonds was 74.7 basis points, up from 72.3 basis points at the previous close.
The 30-year bond ended up 20 Canadian cents at C$116.39 to yield 4.038 percent. In the United States, the 30-year treasury yielded 4.382 percent.
The three-month when-issued T-bill yielded 2.05 unchanged from the previous close.