* C$ rises to C$0.9591, or $1.0426
* Bond prices weaker across the board
By Solarina Ho
TORONTO, April 6 (Reuters) - The Canadian dollar powered to a new three-year high against its U.S. counterpart on Wednesday, underpinned by firm oil prices and the appeal of the country's overall economic health.
Expectations that the Bank of Canada will raise interest rates in the coming months has also helped the currency's resiliency.
In contrast to Canada, it remained unclear when the U.S. Federal Reserve will begin hiking interest rates, with Tuesday's minutes from the latest Federal Open Market Committee meeting showing Fed officials divided over the timing of an exit from its ultra-easy monetary policy. [ID:nN14EDQUOT]
"It's broadly higher commodities over the past few days. There's also all the questions about monetary policy," said Charles St-Arnaud, Canadian economist and currency strategist in New York at Nomura Securities International.
Brent crude traded above $122 a barrel, near 2-1/2-year highs, while U.S. crude was steady above $108 a barrel, fueled by ongoing turmoil in the oil-rich Middle East and North Africa regions. U.S. dollar weakness ahead of Europe's central bank rate decision on Thursday also provided strength. Oil, a key Canadian export, has been a key driver for the commodity-linked currency. [O/R]
At 8:32 a.m. (1232 GMT), the currency CAD=D4 stood at C$0.9591 to the U.S. dollar, or $1.0426, higher from Wednesday's North American finish of C$0.9639 to the U.S. dollar, or $1.0375. It hit a high over C$0.9584, or 1.0434 earlier in the session.
In November 2007, the currency hit a high of C$0.9059 to the U.S. dollar, or $1.1039.
"The most important (driver) is the economy, because it's leading to the other factors," said St-Arnaud, adding that economic data is pointing to strong numbers in the first quarter gross domestic product data.
"One of the stories that's been really important in 2010 and continues to be important is actually we continue to see inflows into Canadian markets," he said, noting that central banks around the world are gradually shifting a small part of their foreign exchange reserves from the U.S. dollar into alternative currencies, such as the Canadian and Australian dollar.
Merger and acquisition flows have also helped boost the Canadian dollar.
Record gold prices -- the bullion soared over $1,460 an ounce on Wednesday -- are also aiding the currency, with gold another key Canadian resource. The price of the precious metal climbed to new heights as the U.S. dollar slid and investors demanded safe-haven assets. [GOL/]
Canadian bond prices were weaker across the curve.
The two-year bond CA2YT=RR was down 3.5 Canadian cents to yield 1.884 percent, while the 10-year bond CA10YT=RR lost 12 Canadian cents to yield 3.398 percent. ( Editing by W Simon )