* C$ firms to $1.0389, highest level since Nov 2007
* No technical barriers seen between new levels, 2007 high
* Ends at $1.0369, weekly gain of 1.8 pct
* Bonds mostly lower as investors shed safe-haven assets
* U.S. jobs jump boosts Canada rate hike expectations (Updates to close, adds comments)
By Ka Yan Ng
TORONTO, April 1 (Reuters) - Canada's dollar charted three-year highs against the U.S. currency on Friday, lifted by soaring oil prices and a robust U.S. jobs report that underpinned hopes of a definitive economic recovery.
The currency CAD=D4 touched its highest level since November 2007, hitting C$0.9626 to the U.S. dollar, or $1.0389, spurred by data that showed U.S. nonfarm payrolls notched a second straight month of solid gains in March. [ID:nOAT004775]
Some analysts said the report marked a decisive shift in the U.S. labor market that should strengthen the economy of Canada's largest trading partner. It was also seen boosting the likelihood of Canadian interest rate hikes, which could attract capital flows.
"From a technical point of view, there aren't any real notable levels between here and C$0.9060, so it's quite a lot of open water here now," said Shaun Osborne, chief currency strategist at TD Securities.
The Canadian currency CAD=D4 finished at C$0.9644 to the U.S. dollar, or $1.0369, up from Thursday's close of C$0.9696 to the U.S. dollar, or $1.0314.
High-flying energy prices drove the Canadian dollar to a modern-day high of C$0.9059, or US$1.1039, in November 2007, according to Thomson Reuters dealing data. But a sell-off in commodities following the global financial crisis sent the currency plunging 18.6 percent the following year.
Oil, a major Canadian export, provided solid support for the commodity-linked Canadian dollar on Friday, though oil trading was volatile. Fighting in Libya, an OPEC producer, remained a rallying point for oil. [O/R]
"The technicals still favor a higher Canada. I think it will be a slow grind higher based on the strong oil prices and prospects of global recovery, which will get more traction I think ... because of the U.S. employment data," said Michael O'Neill, managing director at Knightsbridge Foreign Exchange.
RATE HIKE EXPECTATIONS FIRM
Canadian bond prices were mostly lower as investors felt more confident in shedding safe-haven assets for stocks and other riskier bets. They underperformed U.S. Treasuries, which rose after a top U.S. Federal Reserve official said he saw no reason to alter course on monetary policy after the employment data. [US/]
Swap markets showed traders pricing in a higher likelihood of Canadian interest rate hikes at every Bank of Canada policy-announcement date from May 31 to Dec 6, with the odds of a September rate hike fully priced in.
Traders maintained bets that there is almost no chance the central bank will raise rates in April. Odds of a May hike were also seen as low. BOCWATCH
BMO Capital Markets senior economist Michael Gregory said the central bank might soon start dropping hints on raising interest rates, given a closing output gap and as government fiscal restraint may not be as substantial as previously expected. He also pointed to the Canadian dollar, saying the strength of the currency "might not be as big an obstacle to rate hikes."
Still, Gregory said Canadian rates hikes are still "not imminent" and that he remains comfortable forecasting a July rate hike, which will bring the key overnight rate to 2 percent at year-end. The rate is now 1 percent.
The two-year bond CA2YT=RR was unchanged to yield 1.832 percent, while the 10-year bond CA10YT=RR lost 15 Canadian cents to yield 3.372 percent. (With additional reporting by Solarina Ho; editing by Peter Galloway)
