* C$ finishes at C$1.0775 to the U.S. dollar
* Up 0.5 percent for the week
* Bonds higher as investors digest U.S. GDP data (Adds details, quote)
TORONTO, July 31 (Reuters) - The Canadian dollar rose against the U.S. currency on Friday, eking out its third straight weekly gain, as the view that the global economy is on the path to recovery gained strength and buoyed riskier assets.
During the day the Canadian unit rose as high as C$1.0763 to the U.S. dollar, or 92.91 cents, shrugging off data that showed Canada's economy contracted for the 10th straight month in May as weak global demand hit the energy and manufacturing sectors. [ID:nN31434455]
Confidence was boosted by U.S. figures that showed the American economy contracted less than expected in the second quarter. [ID:nN31416560]
The Canadian currency had "another good day" as investor confidence remains relatively strong, said Steve Butler, director of foreign exchange trading at Scotia Capital.
"The markets are starting to feel better and better about the world being a safe place again. We've continued to see people unwinding safe haven trades," he said.
Strong corporate earnings globally have helped ignite a rally in many higher-yielding assets this month as risk appetite has picked up after drying up for much of June.
The Canadian dollar is up nearly 8 percent in July after a skid of 6 percent in June.
The Canadian currency finished the session at C$1.0775 to the U.S. dollar, or 92.81 U.S. cents, up from C$1.0842 to the U.S. dollar, or 92.23 U.S. cents, at Thursday's close. It is up 0.5 percent for the week.
"Part of it is the spike in oil prices and that has helped the Canadian dollar sprout some wings," said Eric Lascelles, chief economics and rates strategist, TD Securities.
The price of oil, a key Canadian export, climbed to settle above $69 a barrel, [ID:nSP388652] while gold prices were also higher.
The currency may also have benefited from month-end portfolio adjustments, experts said.
"A lot of people rebalance their portfolio toward month end so there's a lot of flows that come in as people are adjusting their hedges," Butler said.
George Davis, chief technical strategist at RBC Capital Markets, said if the Canadian dollar can manage to close above C$1.0784 to the U.S. dollar, or 92.73 U.S. cents, it would indicate a bearish sentiment towards the U.S. dollar and open the door for a move toward C$1.0600, or 94.34 U.S. cents.
BOND PRICES HIGHER
Canadian bond prices were higher across the curve as the market followed the U.S. Treasury market, where prices rose on caution over a weak consumer spending reading in the U.S. GDP report. [ID:nN31437660]
"My sneaking suspicion is that Canada has gone along for the ride with the U.S.," Lascelles said. "The market is perhaps dwelling on the consumer spending picture that was painted in the U.S. GDP number."
The two-year Canadian bond was up 11 Canadian cents at C$99.16 to yield 1.415 percent, while the 10-year bond rose 77 Canadian cents to C$102.35 to yield 3.465 percent.
The 30-year bond was was up C$1.75 to C$117.50 to yield 3.956 percent. In the United States, the 30-year Treasury yielded 4.3002 percent.
Canadian bonds mostly underperformed U.S. Treasuries. The Canadian 30-year bond was 34.4 basis points below the U.S. 30-year yield, compared with about 37 basis points below on Thursday. (Reporting by Jennifer Kwan; editing by Peter Galloway)
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