TORONTO, Oct 26 (Reuters) - Strong commodities prices gave a boost to the Canadian dollar, which reached a 33-year high against a weaker U.S. dollar on Friday.

Domestic bond prices, with no major economic data to consider, moved higher as the relentless climb of the Canadian currency increased the likelihood that the next interest rate move by the Bank of Canada will be a cut.

The Canadian currency closed at at US$1.0393, making a U.S. dollar worth 96.22 Canadian cents, up from Thursday's close of US$1.0353, or 96.59 Canadian cents.

During the overnight session the Canadian dollar hit US$1.0428, its highest level since 1974. That was partly due to U.S. crude oil prices CLc1 surging to a record high above $92 a barrel.

A 28-year high for gold prices XAU= above $785 an ounce also helped the currency, as Canada is a major commodities producer and exporter.

While it slipped back some during the session, the currency stayed well bid as investors sold off the U.S. dollar.

"We've seen oil, gold, and base metals increasing and providing strong backdrop for the Canadian dollar, but the driving force was U.S. dollar weakness," said Matthew Strauss, senior currency strategist at RBC Capital Markets.

The greenback has been under siege as of late as the U.S. economy has been battered by a credit crunch and a crisis in the housing sector.

The U.S. dollar hit a record low against a basket of major currencies on Friday as investors bet the U.S. Federal Reserve will cut interest rates when it meets next week, and that it may be forced to cut again after that.

The market has priced in a 25 basis point cut by the Fed to 4.50 percent next week, which would put the key U.S. rate on par with Canada's for the first time since February 2005.

BONDS MAKE GAINS

Canadian bond prices climbed higher ahead of next week's Fed meeting and as market players worried that an interest rate cut may also be in Canada's near future.

"One factor I can point to (for the rise in bond prices) is just the relentless strength of the Canadian dollar," said Doug Porter, deputy chief economist at BMO Capital Markets.

That's because there is a growing sense that the currency is getting away from policy makers, despite the growing rhetoric over how the Canadian dollar has risen too far too fast. That may increase the chances that the Bank of Canada will have to translate their words into action by cutting interest rates, he said.

Porter added that the strong Canadian dollar could also translate into significantly lower inflation as it allows firms to cut prices.

A survey released by Statistics Canada showed Canadian manufacturers' optimism about output and demand for their goods dimmed in the fourth quarter. The firms cited more production difficulties due to the rapid rise of the Canadian dollar and a skilled labor shortage.

The two-year bond was up 8 Canadian cents at C$100.25 to yield 4.122 percent, while the 10-year bond rose 31 Canadian cents to C$97.81 to yield 4.280 percent.

The yield spread between the two-year and 10-year bond moved to 15.8 basis points from 16.0 at the previous close.

The 30-year bond increased 61 Canadian cents to C$110.85 to yield 4.344 percent. In the United States, the 30-year treasury yielded 4.697 percent.