By Cameron French
TORONTO, March 23 (Reuters) - The Canadian dollar ended lower against the U.S. currency on Friday, as the greenback rallied late in the session, offsetting a Canada-positive rise in the price of oil.
Domestic bond prices ended flat, as a lack of domestic economic news had the market looking ahead to some key U.S. events next week.
The currency finished at C$1.1608 to the U.S. dollar, or 86.15 U.S. cents. down from C$1.1582 to the U.S. dollar, or 86.34 U.S. cents, at Thursday's close.
Crude oil futures touched their highest level since December, giving the Canadian dollar an early lift, but strong U.S. housing-related data helped the greenback rally late.
"The declines today are really consistent with the fact that the U.S. dollar is gaining strength almost across the board," said Carolyn Kwan, markets economist at Scotia Capital.
For the week, however, the Canadian currency rose a sharp 1.2 percent, due to mid-week gains on the back of stronger than expected Canadian inflation data and U.S. Federal Reserve statements that sparked talk about possible U.S. rate cuts.
Speculation that Canadian auto parts supplier Magna International Inc. MGa.TO may join with a private equity partner to off to buy automaker Chrysler Group for around US$4.6 billion may have weighed on the currency, but analysts said any impact would likely have been marginal.
For the session, the currency stayed in a narrow range of 86.12 U.S. cents to 86.44 U.S. cents.
The Canadian dollar is now well above the 15-month lows hit in February, but analysts have urged caution about expecting long-term gains, as they fear the crisis in the U.S. subprime mortgage sector could have an impact on broader U.S. growth, which could in turn pressure both the Canadian economy and commodity prices.
There will be no Canadian data releases until next Friday, when the market will digest economic growth for January, and wholesale and raw materials prices for February.
"It looks like the Canadian dollar will just get pulled along with developments in the U.S.," said Kwan.
A key event will be congressional testimony by U.S. Federal Reserve Chairman Ben Bernanke on Wednesday she said.
BONDS LITTLE CHANGED
Bonds were largely flat, giving up early gains as surprisingly strong U.S. housing data weighed on debt prices on both sides of the border.
With U.S. treasuries selling off sharply, U.S.-Canada yield spreads narrowed.
Canadian bonds ended much lower on the week, as Tuesday's strong inflation data muffled expectations of a Bank of Canada rate cut, and had some wondering when the bank might start tightening.
The Bank of Canada's overnight rate has been held at 4.25 percent since last May, when the central bank finished off a string of seven straight rate hikes.
The two-year bond slipped 1 Canadian cent to C$99.54 to yield 3.969 percent, while the 10-year bond eased 1 Canadian cent to C$99.14 to yield 4.113 percent.
The yield spread between the two-year and 10-year bond moved to 14.4 basis points, from 14.8 at the previous close.
The 30-year bond edged ahead 5 Canadian cents to C$124.40 to yield 4.204 percent. In the United States, the 30-year treasury yielded 4.204 percent.
The three-month when-issued T-bill yielded 4.18 percent, unchanged from the previous close.