* C$ falls to end at 98.39 U.S. cents despite strong data
* Bond prices fall on data despite global safe haven bid
* Canada core inflation jumps above 2 percent
* Retail sales rise by 0.7 pct in January (Adds bond details, updates prices throughout)
By Ka Yan Ng
TORONTO, March 19 (Reuters) - The Canadian dollar nearly wiped out the week's gain against the U.S. currency in a volatile session on Friday, rattled by a global move away from riskier assets that took down the price of key commodities.
Earlier in the day, Canadian inflation and retail sales data pushed the currency to its highest level since July 2008 -- C$1.0062 to the U.S. dollar, or 99.38 U.S. cents -- and it looked primed for another step closer to parity with the U.S. dollar.
Canadian core inflation stayed unexpectedly high in February and retailers posted solid sales gains in January, in a pair of reports that showed the economy is heating up. [ID:nN19128965]
But the Canadian dollar's gains quickly reversed as the price of oil and gold tumbled about 2 percent each on news of an unexpected interest rate hike in India and persistent worries about Greece's debt problems -- all of which sent investors to the safety of the U.S. dollar. [FRX/] [O/R] [GOL/] [ID:nSGE62I0HP]
The Canadian dollar ended lower for a second straight session at C$1.0164 to the U.S. dollar, or 98.39 U.S. cents, down from Thursday's finish of C$1.0137 to the U.S. dollar, or 98.65 U.S. cents.
The Canadian dollar fell as low as C$1.0189 to the U.S. dollar, or 98.15 U.S. cents, nearing its low for the week.
"Both (economic reports) blew away expectations and as a result, there was a widespread view that the Canadian dollar was headed towards parity. What has derailed that, certainly for the moment, has been once again global macro issues," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
"It's really been a widespread rally for the U.S. dollar."
Spitz said the technical and fundamental factors still favor a return to test the Canadian dollar at a one-for-one basis with the greenback.
"All in all parity is still on the horizon," he said.
For the week, the Canadian dollar was up 0.33 percent.
Interest-rate sensitive short-dated Canadian bond prices fell on Friday, as the stronger-than-expected data affirmed growing expectations of interest rate increases and despite a global flight to safety stemming from tensions about Greece's debt burden.
"It's nearing the expiry of the bank's conditional commitment. I think domestic data is more the focus in Canada," said Kam Bath, fixed-income strategist at RBC Capital Markets.
The two-year government bond CA2YT=RR dropped 13 Canadian cents to C$99.78 to yield 1.618 percent, while the 10-year bond CA10YT=RR shed 31 Canadian cents to C$102.05 to yield 3.487 percent.
Yields on overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, rose after the report, showing the market saw tightening as more likely than before the data. BOCWATCH.
Markets suggest there is high possibility the central bank will hike rates by 25 basis points in July.
"The odds are growing for more aggressive policy tightening in the second half of this year," said Sal Guatieri, senior economist at BMO Capital Markets.
Canadian bonds mostly underperformed against their U.S. counterparts. The difference between 10-year yields narrowed 2.3 basis points to 20.8 basis points. (Additional reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)