* C$ rises to three-year high at $1.0323
* Bonds firm up in safe-haven play, falling equities
* Solid demand for C$3 bln auction of Canada 2-yr notes
* Next up: Canada trade data for January at 8:30 a.m.
By Ka Yan Ng
TORONTO, March 9 (Reuters) - The Canadian dollar gained on Wednesday to its highest level against the greenback in more than three years, despite a slight retreat in U.S. oil prices.
Canada's resilient dollar shrugged off a 0.6 percent decline in U.S. benchmark West Texas Intermediate crude, the commodity that is highly influential to the currency because of growing output and large exports to the United States.
The Canadian dollar broke through the C$0.97 barrier against the U.S. dollar and hit its highest level since November 2007. It rose as high as C$0.9667 to the U.S. dollar, or $1.0344.
World benchmark Brent crude remained buoyant, rising 2.55 percent to just under $116 a barrel. Other commodity prices were softer, as measured by the Reuters-Jefferies CRB index .CRB, which was off 0.24 percent.
Canada's dollar CAD=D4 closed at C$0.9687 to the U.S. dollar, or $1.0323, up from C$0.9714 to the U.S. dollar, or $1.0294, at Tuesday's North American session close.
"What this does show is that there is some underlying strength in the Canadian dollar, which doesn't look set to go away any time soon unless commodity prices pull a major retreat. I think that's the one thing that could really knock it off its perch," said Doug Porter, deputy chief economist at BMO Capital Markets.
"The other thing that could unwind the loonie would be the economic data that we're going to see over the next couple of days."
Market players will be searching for evidence that the Canadian economy's recovery has momentum when they look at the January trade and February jobs figures due on Thursday and Friday, respectively. ECONCA
"Both are coming off incredibly strong numbers a month ago, but the big question is whether that strength can be maintained or not," said Porter.
"We think both reports will be a bit of a pale imitation of the prior months, although both will still be relatively solid."
The data may help firm up the market's thinking on the timing of interest rate hikes in Canada. The first fully priced-in 25 basis point rate hike is for the September Bank of Canada policy-setting, according to a Reuters calculation of yields on overnight index swaps.
Canadian government bond prices firmed across the curve on Wednesday in a safe-haven play on worries over the Libyan conflict and euro zone debt crisis.
Porter said Canadian bond action largely matched movement in U.S. Treasuries, reflecting softening energy prices and stocks and an absence key economic indicators today.
The two-year bond CA2YT=RR was up 2 Canadian cents to yield 1.872 percent, while the 10-year bond CA10YT=RR rose 6 Canadian cents to yield 3.392 percent.
Canada's sale of two-year government bonds met with strong demand, helped by yields well above U.S. levels and interest from foreign investors who perceive the country as a safe haven. [ID:nN09268621]
The C$3 billion auction produced an average yield of 1.867 percent, the highest for a two-year auction since last April. (Reporting by Ka Yan Ng; editing by Peter Galloway and Jeffrey Jones)