* C$ surrenders some gains to $1.0559
* Bond prices mixed
* Next up: Canada retail sales for February
By Ka Yan Ng
TORONTO, April 21 (Reuters) - The Canadian dollar extended gains to hit a fresh 3-1/2 year high on Thursday as part of an across-the-board exit from the U.S. currency.
The Canadian unit jumped as high as C$0.9455 to the U.S. dollar, or $1.0576, early in the day, the highest level since November 2007.
The currency has climbed more than 2 percent since Tuesday after Canada's annual inflation rate in March jumped to its highest level since September 2008, ratcheting up pressure on the Bank of Canada to resume raising interest rates soon. [ID:nN19274146]
Having broken through the C$0.95 level, analysts say there are few technical barriers in the way of the Canadian dollar. Market observers say the currency could test its modern high of C$O.9059 to the greenback, or $1.1039, reached in November 2007, according to Thomson Reuters dealing data.
Strong corporate earnings buoyed risk appetite in illiquid pre-Easter holiday trade, threatening to drive the broadly weaker greenback to historic lows against a basket of currencies. [ID:nLDE73K0TJ] [FRX/]
"We're still in a pretty good uptrend. The Canadian dollar is benefiting from the stampede into risk-seeking on the back of a much weaker U.S. dollar," said Michael O'Neill, managing director at Knightsbridge Foreign Exchange.
Trading volumes will likely thin out ahead of the long weekend, but not before market participants see the February figures for Canadian retail trade. The data is expected to show a rebound in consumer spending after sales unexpectedly dropped in January from December.
Analysts, on average, forecast a 0.6 percent increase in overall sales for February and an increase of 0.5 percent excluding auto sales. CARSLS=ECI ECONCA
At 7:55 a.m. (1155 GMT), the Canadian dollar CAD=D4 was at C$0.9471 to the U.S. dollar, or $1.0559, up from C$0.9533 to the U.S. dollar, or $1.0490, at Wednesday's North American finish.
Canadian bonds were mixed ahead of the retail sales data, while sentiment was also tilted in favor of riskier assets. The two-year bond CA2YT=RR fell 3 Canadian cents to yield 1.823 percent, while the 10-year bond CA10YT=RR was up 14 Canadian cents to yield 3.314 percent.
(Editing by Padraic Cassidy)