TORONTO (Reuters) - The Canadian dollar rose against the greenback for a third straight session on Friday, encouraged by stable equity and commodity markets and reassured by the mostly rosy economic outlook issued by the Bank of Canada on Thursday.
The Canadian dollar rose as high as C$1.0794 to the U.S. dollar, or 92.64 U.S. cents.
The Bank of Canada declared Canada's recession to be virtually over and offered a mostly upbeat view on the world economy. As well, the central bank toned down its stance against the Canadian currency's appreciation.
"It's not off their radar screens but they have watered down the concern about the Canadian dollar strength," said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"I think the market feels more comfortable that the Bank of Canada at this point will not stand in front of the rally in the Canadian dollar," he said.
But Bank of Canada Governor Mark Carney warned on Thursday that the bank would not be afraid to use unorthodox tools if it felt the Canadian dollar was climbing too sharply.
Two cabinet ministers, Finance Minister Jim Flaherty and Trade Minister Stockwell Day, chimed in on Friday to voice their concern about the appreciating currency.
Day said that a rising Canadian dollar was hurting the country's exports, but that the currency has not reached a level to cause serious worries.
The Canadian dollar finished at C$1.0829 to the U.S. dollar, or 92.34 U.S. cents, up from Thursday's finish of C$1.0865 to the U.S. dollar, or 92.04 U.S. cents. It is up 3.1 percent for the week.
"It just consolidated its amazing gains of the week," said Sal Guatieri, senior economist at BMO Capital Markets.
"Higher commodity prices, fading risk aversion and some softness in the greenback, and, of course, the Bank of Canada's call that the recession is all but over," were major drivers of its strength, he said.
The Canadian dollar also drew support on Friday from relatively stable equity markets and firmer crude oil prices, which settled slightly above $68 a barrel, in part on optimism about a turnaround in the global economy.
Canadian bond prices were flat to lower across the curve as Toronto equity markets managed to hang on to gains after a relatively lackluster session.
The Canadian market mimicked U.S. Treasuries, which were little changed on Friday as investors braced for a record volume in bond auctions next week.
The two-year Canada bond was down 3 Canadian cents at C$99.86 to yield 1.329 percent, while the 10-year bond fell 18 Canadian cents to C$101.65 to yield 3.549 percent.
The 30-year bond was down 10 Canadian cents to C$115.65 to yield 4.056 percent. In the United States, the 30-year Treasury yielded 4.5441 percent.
Canadian bonds mostly underperformed U.S. Treasuries across the curve. The Canadian 30-year bond was 49 basis points below the U.S. 30-year yield, compared with about 50 basis points below on Thursday.
Reporting by Jennifer Kwan; editing by Peter Galloway