* C$ ends at 97.48 U.S. cents, 9th straight up day
* Backtracks after hitting highest level since October
* Increased view that C$ could test parity
* Bonds fall as eyes on supply calendar (Adds details)
By Ka Yan Ng
TORONTO, March 10 (Reuters) - The Canadian dollar ended stronger for a ninth straight session against the U.S. dollar after touching its highest level in almost five months on Wednesday, helped by talk it is set to test parity with the greenback.
Boosted by firm oil prices and the prospect of rising Canadian interest rates, the currency extended as high as C$1.0216 to the U.S. dollar, or 97.89 U.S. cents, before retreating.
It closed at C$1.0259 to the U.S. dollar, or 97.48 U.S. cents, up slightly from C$1.0264 to the U.S. dollar, or 97.43 U.S. cents, at Tuesday's close.
For the last nine sessions, the Canadian dollar has tested the stronger end of the roughly C$1.02 to C$1.07 trading band it has held for the past five months. Analysts said this may signal the Canadian dollar has momentum to head higher.
"If we look at the intraday lows (in U.S. dollar terms) during the last few days, everyday it's a lower low than the previous day, which suggest that there's still a willingness to take the Canadian dollar higher," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
Market players are next eyeing the C$1.0207 level, the highest level reached in October, to set up a move towards parity with the greenback. The last time the Canadian dollar was on equal footing with the U.S dollar was in July 2008.
Speculation the Canadian dollar will reach parity with the U.S. currency has increased recently.
CIBC World Markets forecast on Wednesday that the Canadian dollar would soar above par with the U.S. dollar by September, a reflection of its view that the Bank of Canada will hike interest rates a full six months ahead of the U.S. Federal Reserve.
Scotia Capital also said it expects a slow grind higher against the U.S. dollar.
"It's only a matter of time before we see the parity level tested," said David Bradley, director of foreign exchange trading at Scotia Capital.
Government bond prices slipped on data from China that added evidence the global recovery was underway.
Chinese exports and imports grew faster than expected in February, underlining the momentum behind the world's third-largest economy. [ID:nSGE6290A5]
Canada's C$3 billion auction of 2-year bonds met with robust demand, surpassing expectations and falling in line with the view that Canadian bonds are in favor internationally. [ID:nN10147800]
"The auction itself went reasonably well," said Eric Lascelles, chief economics and rates strategist at TD Securities.
"There's some caution simply because Canada's bond market generally has simply sold off so aggressively recently that there's a reluctance to go too aggressively long into the short end with so much rumbling about the Bank of Canada."
Canadian government bond prices have been on the decline since the central bank sounded a hawkish tone on interest rates.
In Canadian new issue news, the province of Ontario reopened a 10-year bond with a C$600 million offering, while Manitoba sold C$250 million of bonds due in 2020. NEWISSUET
New U.S. supply was also in focus as after Wednesday's sale of re-opened 10-year Treasury securities. Next up is the auction of re-opened 30-year Treasury securities on Thursday.
The two-year Canadian government bond CA2YT=RR fell 4 Canadian cents to C$99.92 to yield 1.541 percent, while the 10-year bond CA10YT=RR was off 18 Canadian cents at C$101.66 to yield 3.537 percent.
Canadian bonds mostly outperformed against their U.S. counterparts, except in the 10-year issue. The difference between 10-year yields widened 0.2 basis points to 18.5 basis points. (Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)