By John McCrank
TORONTO, March 5 (Reuters) - The Canadian dollar ended a three-day losing streak against the U.S. dollar on Wednesday, climbing nearly 1 percent as it got a boost from record oil and gold prices, and the recent rally in the greenback fizzled.
Domestic bond prices, with no Canadian economic data to consider, ended mixed ahead of key data later in the week.
The Canadian dollar closed at US$1.0143, valuing a U.S. dollar at 98.59 Canadian cents, up from US$1.0049, valuing a U.S. dollar at 99.51 Canadian cents, at Tuesday's close.
"The commodity backdrop is really lending itself towards a strengthening Canadian dollar again," said Gareth Sylvester, senior currency strategist at HIFX Plc in San Francisco.
The Canadian currency is often influenced by swings in commodity prices as Canada is a major producer of energy and precious metals.
U.S. crude oil CLc1 rose to a record high of $104.56 after data showed U.S. supplies unexpectedly dropped, following an announcement by OPEC earlier in the day that it was not about to raise production levels.
Gold, another key commodity Canada produces, also rallied to a new high as investors hedged against inflation, driven by the record crude prices. The active gold contract for April delivery GCJ8 on the New York Mercantile Exchange hit a peak of $995.20 an ounce.
The growing concerns about inflation in the United States weakened the greenback against a basket of currencies.
Despite the darkening inflation outlook, the U.S. Federal Reserve is expected to focus on growth when meets in slightly under two weeks and is expected to slash its key lending rate by as much as 75 basis points.
On Tuesday, the Bank of Canada cut its key lending rate by 50 basis points to 3.50 percent, its biggest cut since 2001.
The bank's accompanying statement indicated more rate cuts to come, causing a selloff in the Canadian dollar.
But the market has had time to mull the implications of the statement and it still sees reasons to buy the currency, said Sylvester.
"We do expect to see some further rate cuts from the Bank of Canada, however, that's pretty much in line with the U.S. also, and therefore Canada will continue to have a yield advantage over the United States."
Bond prices were mixed, as investors positioned themselves ahead of key employment reports from both sides of the border on Friday.
"Today was a day of reflection in the bond market, with investors stepping back and asking, just how much further does the market really want to push down rates," said Sheldon Dong, fixed income strategist at TD Waterhouse Private Investment.
On Thursday, building permits data for January and the February Ivey Purchasing Managers Index are both due to be released.
The two-year bond was up 6 Canadian cents at C$102.69 putting its yield at 2.647 percent, its lowest point since March 2004. The 10-year bond dipped 4 Canadian cents to C$102.77 to yield 3.644 percent.
The yield spread between the two- and 10-year bond was 99.7 basis points, up from 94.5 points at the previous close.
The 30-year bond fell 37 Canadian cents to C$114.61 to yield 4.134 percent. In the United States, the 30-year treasury yielded 4.606 percent.
The three-month when-issued T-bill yielded 2.81 percent, down from 2.90 percent at the previous close. (Editing by Rob Wilson)