* C$ at C$0.9914 vs US$, or $1.0086 * U.S. economic data boosts sentiment * Bond prices lower across the curve By Jon Cook TORONTO, March 15 (Reuters) - The Canadian dollar firmed against its U.S. counterpart on Thursday as U.S. Treasury yields eased and the greenback's rally ebbed, but it was still down against most other major currencies. Canada's role as the largest U.S. trading partner has recently helped it outperform other commodity-linked currencies as strong U.S. data and a more optimistic economic tone from the Federal Reserve have boosted North American sentiment. "For some time you've had the Canadian dollar being driven by risk sentiment and that has largely been gauged against the S&P 500," said Mazen Issa, macro strategist at TD Securities. The S&P 500 index hit 1,400 for the first time in four years on Thursday as U.S. economic data, including weekly initial jobless claims and producer prices on Thursday, continued to underpin the theme of a strengthening U.S. economy. The Canadian dollar touched a session high at C$0.9906 versus the U.S. dollar, or $1.0094, but remained short of this week's low at C$0.9881. At 1:15 p.m. (1715 GMT), the Canadian dollar was at C$0.9914 versus the U.S. currency, or $1.0086, up from Wednesday's North American session close at C$0.9930 versus the U.S. dollar, or $1.0070. On Wednesday the Canadian dollar hit its strongest level against the Australian currency this year, breaking through the 200-day moving average and testing an overnight high at C$1.0450. But after testing technical thresholds against the Australian and New Zealand currencies and against the euro, Canada's dollar retreated on Thursday. "That might have caused a few of the short Canadian dollar positions to get squeezed on the move back up on the cross," said David Bradley, a director of foreign exchange trading at Scotia Capital. Canada's resource-reliant dollar was also held back after top consumer China said on Wednesday it must embrace slower growth to keep its economy from faltering, hurting prices of industrial metals such as copper. Canadian bond yields rose above their yearly highs set on Wednesday as risk appetite improved. The two-year bond was down 5 Canadian cents to yield 1.266 percent, while the 10-year bond dropped 38 Canadian cents to yield 2.197 percent.