* C$ gains to 98.57 U.S. cents
* Bonds weaker ahead of Fed rate decision
* Manufacturing, productivity data firmer than expected
* More to strong C$ than commodity prices -Flaherty (Updates with currency's high, finance minister's comments)
By Ka Yan Ng
TORONTO, March 16 (Reuters) - The Canadian dollar hit its highest level since July 2008 on Tuesday, boosted by firmer oil and equities prices and by data that provided more proof the Canadian economy is moving to a surer footing.
The currency reached C$1.0145 to the U.S. dollar, or 98.57 U.S. cents, its highest level in 20 months, resuming its upward march after pausing Monday when investors took a break after an 11-day stretch of gains.
Canada's economic recovery is picking up pace with figures on Tuesday showing January manufacturing sales higher than expected and labor productivity rising for the first time in more than a year. [ID:nN16249105]
"Certainly it's pointing to solid growth being sustained," said Paul Ferley, assistant chief economist at Royal Bank of Canada. "At the moment, we're still of the view that we'll see some moderation from the 5 percent (GDP) gain in the fourth quarter."
He said the data is consistent with his forecast that first-quarter growth will be just under 4 percent, although it could be higher if statistics continue to come in very firm.
At 11 a.m. (1500 GMT), the Canadian dollar was at C$1.0149 to the U.S. dollar, or 98.53 U.S. cents, up from Monday's close at C$1.0197 to the U.S. dollar, or 98.07 U.S. cents.
Oil also supported the currency as it advanced above $81 a barrel in a cautious market ahead of an OPEC meeting and monetary policy moves expected from the world's top two oil consumers, the United States and China. [O/R]
Stock markets also moved higher.
Finance Minister Jim Flaherty said the upward pressure on the Canadian dollar is coming from more than just commodity prices. [ID:nN16248351] [ID:nLDE62F1LZ]
"There has been some upward pressure on the Canadian dollar as we all know, and some other currencies, reflecting the weakness in the U.S. dollar," Flaherty said.
"It's a market currency and we be believe in markets and when you believe in markets you have to let your currency float."
The U.S. Federal Reserve's open market committee was holding a one-day meeting on Tuesday at which it was expected to reiterate its vow to keep interest rates very low for an "extended period".
While the Fed is expected to hold rates steady, the market is looking for any hints about the Fed's assessment of the economic outlook, said Firas Askari, head of foreign exchange trading at BMO Capital Markets.
Canadian bond prices were mixed on Tuesday before the Fed's policy decision later in the day. The two-year government bond CA2YT=RR dipped 2 Canadian cents to C$99.87 to yield 1.570 percent, while the 10-year bond CA10YT=RR was up 13 Canadian cents to C$102.14 to yield 3.476 percent. (Additional reporting by Jennifer Kwan; editing by Peter Galloway)