By Frank Pingue
TORONTO, Dec 28 (Reuters) - The Canadian dollar rose to its highest level in five weeks versus the greenback on Friday helped by lofty commodity prices and more U.S. dollar weakness.
Domestic bond prices, with no Canadian data to digest until next week, followed the U.S. treasury market higher as recent U.S. data upped the chance for a Federal Reserve rate cut next month.
At 9:40 a.m. (1440 GMT), the Canadian dollar was worth US$1.0245, valuing a U.S. dollar at 97.60 Canadian cents, up from Thursday's close of US$1.0183, or 98.20 Canadian cents per U.S. dollar.
The dollar, which is up about 4.5 percent in the last two weeks, extended gains made Thursday when commodity prices rose on news that Pakistani opposition leader Benazir Bhutto had been assassinated.
"It's a little bit of U.S. dollar weakness overnight and I think that's spilled over into Canada, and also a carry over from yesterday's (U.S.) dollar decline," said Steve Butler, director of foreign exchange trading at Scotia Capital.
"I think we will probably see more U.S. dollar weakness to start the new year and I think that's going to be a benefit to Canada ... and certainly commodities are doing a bit better."
Butler, who feels some people are becoming a little bit leery about how much higher the Canadian dollar can go, said he could see a move to US$1.0282, putting a U.S. dollar at 97.25 Canadian cents.
In September, the Canadian dollar pushed past parity with the U.S. dollar for the first time since 1976. It hit a modern-day high of US$1.1039 in November before sliding back.
Canadian bond prices were higher across the curve as dealers took their cue from the U.S. treasury market given the lack of any domestic data to influence trade.
The Canadian economic calendar is empty until the release of the industrial product price and raw materials price indexes for November on Jan. 4.
The overnight Canadian Libor rate LIBOR01 was at 4.2500 percent, up from 4.2083 percent on Thursday.
Friday's CORRA rate CORRA= was at 4.3107 percent, up from 4.2763 percent on Thursday. The Bank of Canada publishes the previous day's rate at around 9 a.m. daily.
The two-year bond was up 8 Canadian cents at C$100.81 to yield 3.806 percent. The 10-year bond was up 8 Canadian cents at C$103.75 to yield 3.853 percent.
The yield spread between the two-year and 10-year bond was 25.6 basis points, up from 23.7 basis points at the previous close.
The 30-year bond rose 32 Canadian cents to C$114.39 to yield 4.148 percent. In the United States, the 30-year treasury yielded 4.557 percent.
The three-month when-issued T-bill yielded 3.88 percent, down from 3.90 percent at the previous close.