TORONTO (Reuters) - The Toronto Stock Exchange's main index was strongly higher yesterday, pulled up by gains by Potash Corp of Saskatchewan and robust resource issues amid firm commodity prices.

The index also reaped continued benefits from interest rate cuts in the United States and Canada earlier in the week, while investors were hopeful of another US rate cut next week.

Potash Corp of Saskatchewan climbed C$8.05, or 6.6 percent, to C$129.93 after the world's largest fertiliser producer doubled its fourth-quarter profit and gave a bright forecast for 2008.

The index has swung wildly this week, spanning a range of almost 1,000 points, following a big five-day slump that was sparked last week by intensifying fears of a US recession.

"Things were overdone, it was really time for some sort of bounce from our extraordinary decline," said Douglas Davis, president at Davis-Rea.

The S&P/TSX composite index closed up 249.87 points, or 1.97 percent, at 12,907.27 with all but two of its 10 main sectors in positive territory. The materials sector led the way up, gaining 4.7 percent, and the energy group rose 3.1 percent as oil climbed due to a tentative deal on a US economic stimulus package, which helped ease recession fears.

Canadian Natural Resources was up C$2.29, or 3.8 percent, at C$63.26, and Suncor Energy added C$4.78, or 5.6 percent, to C$90.50.

The gold producers' subsector rallied 4.2 percent, boosted by a surge in the price of bullion as the US dollar weakened.

The index has finished higher in three out of four sessions so far this week, including a 500-point surge on Tuesday. It has gained back almost half of the more than 1,500 points it lost in its five-day nosedive, but it is still down almost seven percent since 2008 began.

"Clearly the market would like to see a string of positive days - two, three, four days - to get the confidence to come back in, but there's not a lot of conviction out there," said Irwin Michael, portfolio manager at ABC Funds.