CANADA FX DEBT-C$ surges to 3-week highs in risk rally

* C$ closes at 99.61 U.S. cents

* Bonds track Treasuries lower (Updates to close, adds details, commentary)

By Claire Sibonney

TORONTO, Dec 2 (Reuters) - The Canadian dollar climbed more than a penny against its U.S. counterpart on Thursday, peaking near a three-week high and outperforming the rest of the major currencies on the back of a broad risk rally.

The Canadian dollar hit a session high of C$1.0028 against the greenback, or 99.72 U.S. cents, its highest level since Nov. 12.

With no Canadian economic data to move on, direction was largely driven by global markets as stocks and commodity prices rallied, due in part to upbeat U.S. housing and retail data. [ID:nN02209260]

"The Canadian dollar is just on a tear," said David Tulk, senior macro strategist at TD Securities.

The strength of the currency was supported by crude oil futures that ended at their highest level in 25 months and by gold's push to nearly $1,400 an ounce. [O/R] [GOL/]

"But, generally, we're looking at a fairly positive risk-on day and the Canadian currency is viewed as a risk play as part of the commodity basket," Tulk said

The euro rebounded against the U.S. dollar on further evidence of economic recovery in Europe and the United States. Traders also cited European Central Bank buying of Portuguese and Irish bonds. [FRX/]

"It's very much a flow driven story," said Sacha Tihayni, a currency strategist at Scotia Capital.

"Everything is going in the same direction today against the U.S. dollar so that provides the pretext for Canadian dollar strength."

The Canadian dollar closed the North American session at C$1.0039 to the U.S. dollar, or 99.61 U.S. cents, up sharply from C$1.0170 to the U.S. dollar, or 98.33 U.S. cents, at Wednesday's close.

The currency is expected to be fairly rangebound and remain close to current levels near parity with the U.S. dollar over the next 12 months, according to a Reuters poll released on Thursday. [ID:nN02224928]

Tihanyi said parity represented a significant support level for the U.S. dollar on Thursday.

The Canadian dollar's upside may be challenged ahead of Friday's release of the Canadian November jobs report, which is expected to show a modest gain. [ID:nN26125524]

It will be the last major piece of data to consider before the Bank of Canada's next interest rate decision on Dec. 7. The U.S. jobs report is also due.

In another poll released on Thursday, primary dealers and global forecasters surveyed by Reuters said unanimously they expected the Bank of Canada to keep interest rates on hold next week, but the uneven economic recovery left them divided on the timing of rate hikes in 2011. [ID:nN02264459]

Canadian government bond prices fell amid the risk-on theme of the day, tracking U.S. Treasuries lower after perceived hawkish comments from St. Louis Federal Reserve Bank President Charles Bullard. [US/]

The two-year government of Canada bond was off 3 Canadian cents to yield 1.690 percent, while the 10-year bond was down 25 Canadian cents to yield 3.208 percent.