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* C$ firms to C$0.9759, or $1.0247
* Bond prices higher as risk appetite wanes
* Politics in focus as government seen falling
By Solarina Ho
TORONTO, March 25 (Reuters) - The Canadian dollar ticked higher against its U.S. counterpart on Friday as oil and general U.S. dollar weakness helped lift the currency ahead of political drama that could bring down the Canadian minority government.
The Conservative government is set to fall on Friday with a likely motion of no-confidence from the opposition parties after they rejected the government's budget plan earlier this week and also accused them of incompetence and dubious ethics. [ID:nN24163285]
However, with polls showing the Conservatives likely to return with another minority government should an election occur in May and the country's economic health relatively stable, the political upheaval might not move the Canadian dollar significantly compared to similar scenarios in other countries. [ID:nN24181946] [ID:nN23274742] [ID:nN24147138]
"I think that the market has somewhat discounted (the elections) for the time being. We're waiting to see what news comes today," said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets.
"The driver is continuing to be what's going on in the external basis. The U.S. dollar has given a little bit of ground versus the other currencies."
The euro brushed away worries about Portugal's debt worries, while the Australian dollar, often a commodity-linked sister currency to Canada, hovered just shy of a 29-year high against the greenback. [FRX/]
Gavsie noted that traders who wanted to be net-short on the USD/CAD came in overnight to add to the existing short positions.
Oil continued to be a major story for the commodity-linked Canadian dollar as well, with strong oil prices -- bolstered by Middle East unrest and the military campaign in Libya -- providing support.
At 8:20 a.m. (1220 GMT), the currency CAD=D4 stood at C$0.9759 to the U.S. dollar, or $1.0247, up marginally from Thursday's North American closed of C$0.9762, or $1.0244.
How the equity markets will perform today will further determine how much stronger the Canadian dollar will get, Gavsie said. He expected the currency to find resistance around C$0.9740 and support at C$0.9810 on Friday.
"There's probably more likelihood for Cad strength on a day like this, but we'll have to wait to see how the equities play out."
Canadian government bond prices rose across the curve, mirroring the U.S. Treasuries, as the appetite for risk eased on worries about the euro zone peripheral debt. [US/]
The two-year bond CA2YT=RR was up 3.5 Canadian cents to yield 1.691 percent, while the 10-year bond CA10YT=RR added 7 Canadian cents to yield 3.209 percent. (Editing by Theodore d'Afflisio)