* C$ hits session high of 85.58 U.S. cents
* High oil and equities drive C$'s gain
* Bond prices boosted by weak U.S. data (Recasts)
TORONTO, May 14 (Reuters) - Canada's dollar closed higher versus the greenback on Thursday as equities rallied and the price of oil, a key Canadian export, rose and helped renew appetite for currencies the market perceives as riskier than the U.S. dollar.
The Toronto stock market's main S&P/TSX composite indexrecaptured a chunk of the previous session's slide with a gain of 1.4 percent on Thursday, and the upbeat investor sentiment spilled over to the Canadian currency.
"The equity market helped as the TSX put in a strong effort all day long," said David Bradley, director of foreign exchange trading at Scotia Capital.
"But I think equities have rallied far enough from their lows and I think we are going to see more of a correction, which is probably going to be negative for the Canadian dollar."
Toronto's key stock index is up about 30 percent from the five-year low hit in early March, but it has already been pushed back from the six-month high it reached last week.
The Canadian dollar closed at C$1.1710 to the U.S. dollar, or 85.40 U.S. cents, up from C$1.1759 to the U.S. dollar, or 85.04 U.S. cents, at Wednesday's close.
Late in the session the currency rallied as high as C$1.1685 to the U.S. dollar, or 85.58 U.S. cents, a move Bradley said was helped by some stop-loss selling that kicked in around the C$1.1700 level.
Another driver behind the currency's move was the rise in oil prices, which were given a boost by hopes that the global recession has bottomed. [ID:nN14507104]
The higher close for the Canadian dollar came after a choppy week during which it backed off a six-month high it hit on Monday.
The next piece of economic data that could have a potential impact on the currency is the March manufacturing survey due on Friday. After that, moves could be exaggerated by thin dealings as traders escape early for the long weekend in Canada.
BOND PRICES HIGHER
Canadian bond prices followed the bigger U.S. Treasury market to a higher close after U.S. data that showed an unexpectedly large number of claims for jobless benefits. [ID:nN14464671]
The figures encouraged dealers to snap up secure government debt, an area that has been rallying of late given recent selloffs in equities.
The benchmark two-year Canadian government bond ended up 3 Canadian cents at C$100.30 to yield 1.103 percent, while the 10-year bond rose 8 Canadian cents to C$105.61 to yield 3.096 percent.
The 30-year bond exited the session up 20 Canadian cents at C$119.55 to yield 3.854 percent.
Canadian bonds underperformed their U.S. counterparts across most of the curve. The 30-year bond yield was about 20 basis points below the U.S. 30-year yield, compared with around 23 basis points below on Wednesday. (Editing by Peter Galloway)
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