TORONTO (Reuters) - The Canadian dollar rebounded to finish just above parity with the U.S. currency on Friday, lifted by a weaker greenback and firmness in commodity and equity markets.

The currency fought back from a low of C$1.0066 to the U.S. dollar, or 99.34 U.S cents, as the price of oil climbed above $85 a barrel following positive U.S. economic data, including March home sales figures.

Gold and base metals also got a lift, in part on the weaker U.S. dollar.

North American equity markets ended on a firmer tone with U.S. stocks higher, lifted by energy and healthcare issues, while Toronto's resource-laden index drew support from higher underlying commodity prices.

The currency ended the session at C$0.9991 to the U.S. dollar, or $1.0009, up from Thursday's finish at exactly C$1 to the U.S. dollar. It was up 1.4 percent for the week.

Earlier, the Canadian dollar slid as inflation and retail sales data came in weaker than expected, dimming the chances the Bank of Canada would hike interest rates aggressively. Currencies usually strengthen as interest rates rise as higher rates attract capital flows.

"I think, generally, we have a weaker U.S. dollar and we have a jump higher in oil prices, so that's all helping the Canadian dollar. I think the market had to get over the initial knee-jerk reaction to the softer than expected CPI data," said Camilla Sutton, currency strategist at Scotia Capital.

A government report showed the annual core inflation rate, closely watched by the central bank, eased in March to 1.7 percent from 2.1 percent in February. The softer reading could reduce the chances of an aggressive, near-term rate hike campaign by the central bank, said Firas Askari, head of foreign exchange trading at BMO Capital Markets.

"The fact that it's lower than the market expected means that the bank may not have to raise as aggressively as the market had anticipated," said Askari.

"Many of the factors that caused a push-up in CPI (in February) were viewed as temporary and very much related to the Vancouver Olympics," he added.

Also weighing on the currency was data that showed retail sales rose less than expected in February.

Retail sales rose for a third consecutive month, climbing 0.5 percent from January on higher sales of cars and parts. However, analysts had expected a gain of 0.8 percent in overall sales.

Earlier this week, the currency rose as high as C$0.9931 to the U.S. dollar, or $1.0069, its strongest level since June 2008, on speculation that the Bank of Canada may soon raise interest rates.

The bank said earlier this week it was time to start withdrawing some of the stimulus that helped pull Canada out of recession.

It said it was no longer promising, so long as inflation is in check, to keep its key rate at a record low 0.25 percent until the end of this quarter. Its next rate announcement is June 1.

DATA BOOSTS BOND PRICES

Canadian bond yields jumped this week following the hawkish language from the Bank of Canada on the assumption the bank might raise rates sooner and steeper than previously expected.

But yields edged lower following Friday's domestic economic figures.

"This softer number here might temper some of those expectations," said Kam Bath, fixed income strategist at RBC Capital Markets, referring to the inflation report.

Overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, edged lower after the inflation data, showing the market saw tightening as slightly less likely than before..

Still, the market was pricing about a 90 percent probability that the central bank will raise interest rates by 0.25 percent in June.

The two-year Canadian government bond was up 7 Canadian cents at C$99.13 to yield 1.984 percent, while the 10-year bond rose 23 Canadian cents to C$100.38 to yield 3.701 percent.

Canadian government bonds mostly outperformed U.S. issues, with the two-year yield 91 basis points above its U.S. counterpart, compared with around 99 basis points the previous session.