TORONTO (Reuters) - Toronto's main stock index ended higher yesterday as commodity prices rose on renewed optimism for China's economic strength, which helped boost the TSX's heavily weighted resource issues.

The TSX's materials sector, up 1.5 percent, led the rally , with Barrick Gold up 0.7 percent at C$43.72, Potash Corp of Saskatchewan up 1.6 percent at C$102.54 and Teck Resources ahead 3.7 percent at C$34.31.

Market observers said the TSX was influenced by the Shanghai composite index, which rose two percent to its highest close in three weeks, buoyed by property stocks, as investors gained confidence that Beijing's property policy would hold steady for the rest of the year after a series of tightening steps

"That's very positive for commodity markets and, by extension, the TSX composite," said Fergal Smith, managing market strategist at Action Economics.

The Toronto Stock Exchange's S&P/TSX composite index finished the day up 86.41 points, or 0.75 percent, at 11,629.88, with seven of its 10 main groups higher.

Firm oil prices also helped boost the resource-laden index, with the energy sector gaining 1.1 percent. Suncor Energy climbed 1.8 percent to C$33.13, while Encana Corp. rose 2.2 percent to C$34.49.

Elsewhere, the Bank of Canada raised its key interest rate, as expected, but cautioned that the domestic and global economic recovery would be slower than previously expected.

The Canadian dollar zoomed nearly a penny higher against the US dollar yesterday, taking its cue from firming equity and commodity markets and looking past a slightly more subdued outlook on the world economy issued by the Bank of Canada.

A rise in oil prices also played a role, pushing the commodity-linked currency to a session high of C$1.0435 to the US dollar, or 95.83 US cents.