* Canadian dollar closes in on seven-week high
* Bonds lower across the curve
* Canada housing starts up 6.1 pct, more than expected
By Ka Yan Ng
TORONTO, March 8 (Reuters) - The Canadian dollar hit its highest level against the U.S. dollar in nearly seven weeks on Monday, driven by firmer oil prices and growing evidence that the domestic economy is recovering.
Closing higher for a seventh straight session, the Canadian dollar was confined to a muted 44-basis-point range with a brief run to session highs after data showed Canadian housing starts rose a stronger than expected 6.1 percent in February. [ID:nN08168275]
The commodity-linked currency was also lifted by a rise in oil prices, an important Canadian export, to nearly $82 a barrel. CLc1 [O/R]
The Canadian dollar ended at C$1.0276 to the U.S. dollar, or 97.31 U.S. cents, up from Friday's finish of C$1.0305 to the U.S. dollar, or 97.04 U.S. cents.
The currency is likely headed to test its October high of C$1.0207 to the U.S. dollar as it has progressively inched ahead in each of the last seven sessions.
"Things are fairly positive for the Canadian dollar, and whether or not we are going to break to a new high today, tomorrow, next month, I think it's coming. All the factors point that it is, it's just a question of timing," said Camilla Sutton, currency strategist at Scotia Capital.
The Canadian dollar added to last week's 2 U.S. cent gain, which was fueled by a combination of strong economic data and firming prices for key Canadian commodities. The rise was also supported by a Bank of Canada statement last week that sounded slightly more hawkish on interest rates. [ID:nN02149877]
The Canadian dollar wasn't alone in its quiet trading session as the greenback was flat against the yen, as was the euro. [FRX/]
"Currencies are all sitting bunched in their ranges here," Sutton said.
The Canadian unit rose as high as C$1.0250 against its U.S. counterpart, or 97.56 U.S. cents, its highest point since Jan. 19.
But it pared gains as the details of the house starts report showed that new home construction in the often-volatile multi-dwelling sector far outpaced gains made by the closely watched single-family home component.
"The details weren't quite as spectacular as we would have liked. So you get a little bit of a reaction of Canadian dollar strength after the number, and then it's faded as people dig into the numbers a bit," said David Watt, senior currency strategist at RBC Capital Markets.
BONDS REMAIN LOWER
Bonds held lower because of solidifying expectations that the global recovery is on track and that domestic interest rates are likely to rise in the second half of the year.
The two-year Canadian government bond CA2YT=RR fell 5 Canadian cents to C$99.92 to yield 1.541 percent, while the 10-year bond CA10YT=RR dropped 28 Canadian cents to C$101.90 to yield 3.507 percent.
Canadian bonds had a mixed performance against their U.S. counterparts across the curve. The difference between 10-year yields narrowed 0.8 basis points to 20.7 basis points. (Reporting by Ka Yan Ng; editing by Peter Galloway)