* Canadian dollar trickles lower in quiet session
* Currency posts third straight weekly gain
* Bond price end higher amid stock market declines
By Frank Pingue
TORONTO, May 23 (Reuters) - The Canadian dollar capped off its third straight winning week with a lower close against the U.S. dollar on Friday, despite lofty prices for commodities, as investors pocketed some recent gains.
Domestic bond prices bounced back from recent losses and finished higher across the curve as falling North American stock markets reignited safe-haven buying of government debt.
The Canadian dollar closed at US$1.0119, valuing a U.S. dollar at 98.82 Canadian cents, down from US$1.0143, valuing a U.S. dollar at 98.59 Canadian cents at Thursday's close.
The lower close for the commodity-linked Canadian currency came despite higher gold prices and a rebound by crude to $132.19, up $1.38, after it backed away on Thursday from an intraday record above $135.
Despite the lower close, the Canadian dollar made enough headway against the greenback earlier in the week to book a 1.2 percent gain for the week, thanks mainly to high oil prices and solid domestic inflation data, as well as a weak U.S. dollar.
But traders opted to pocket some of the latest gains for the Canadian dollar, which is suddenly at the upper end of the range it has occupied for much of the year.
"If anything, it's just a slight unwind of some of the exuberance we've seen perhaps midweek," said Eric Lascelles, chief economics and rates strategist at TD Securities. "You've had a pretty good run over the past week but it may have been a bit too much too soon."
The Canadian dollar broke through parity against the U.S. dollar last week and continued its rally this week to a high of US$1.0184, valuing a U.S. dollar at 98.19 Canadian cents.
The next batch of key Canadian data are not due until late next week when quarterly gross domestic product data and the industrial product price and raw materials price indexes for April are released May 30.
BOND PRICES RALLY
Canadian bond prices shot higher as investors unloaded more risky assets like stocks in favor of secure assets ahead of the long U.S. holiday weekend.
The Toronto Stock Exchange's main index .GSPTSE dropped 69.00 points, or 0.47 percent to 14,723.36, while the Dow Jones industrial average .DJI fell 145.99 points, or 1.16 percent to 12,479.63.
Trading in bonds ground to halt by mid-afternoon as the U.S. bond market closed early for the holiday weekend, which will see U.S. markets closed for Memorial Day on Monday.
Earlier in the session, domestic bond prices gave back some of their gains following a slightly firmer than expected U.S. report on April existing home sales.
"People are having some second thoughts about what was a pretty massive selloff the last few days so you're rallying back a little on that," said Lascelles. "Plus the stock market's down and that seems to be prompting a rally as well."
The two-year bond ended up 6 Canadian cents at C$101.48 to yield 2.990 percent. The 10-year bond rose 27 Canadian cents to C$102.82 to yield 3.629 percent.
The yield spread between the two- and 10-year bond was 63.9 basis points, down from 65.1 at the previous close.
The 30-year bond jumped 56 Canadian cents to C$115.41 for a yield of 4.088 percent. In the United States, the 30-year treasury yielded 4.576 percent.
The three-month when-issued T-bill yielded 2.67 percent, down from 2.70 percent at the previous close.