Positive U.S. data also helped the S&P/TSX composite index extend gains to a fourth session, up 22.22 points to 12,054.8, down from early highs as gold prices and stocks turned negative. The TSX Venture Exchange gained 4.33 points to 1,225.57.
The Canadian dollar backed off 0.25 of a cent to 101.1 cents US after closing at a fresh 3 1/2 month high Thursday as Statistics Canada reported that the Consumer Price Index declined 0.1 per cent on a seasonally adjusted basis in July. Economists had been looking for a 0.1 per cent rise after the index decreased 0.2 per cent in June.
The agency said Friday that consumer prices rose 1.3 per cent in the 12 months to July, following a 1.5 per cent gain in June.
The loonie was down from early highs as analysts suggested the data represented another reason for the Bank of Canada to keep interest rates on hold.
"With inflation running below target and external headwinds still blowing, we don't expect the Bank of Canada to resume tightening until well into next year," said BMO Capital Markets senior economist Robert Kavcic.
U.S. markets were up at the end of a positive week, helped along by a positive reading on consumer confidence. The University of Michigan's index rose to a preliminary August reading of 73.6 from a July reading of 72.3.
Also, the Conference Board's index of future U.S. economic activity posted a 0.4 per cent gain in July.
The Dow Jones industrials edged 7.4 points higher at 13,257.51.
The Nasdaq composite index was 1.89 points higher at 3,064.28, while the S&P 500 index added 0.3 of a point to 1,415.81.
The TSX also finished at a 3 1/2-month high Thursday, closing above 12,000 for the first time since early May when the European debt crisis took a turn for the worse as markets focused on high debt levels in Spain. Traders were encouraged by a solid reading on American housing starts and hopes that central bankers are prepared to do whatever is necessary to keep the economic recovery on track and preserve the European monetary union.
This was also the case Friday when traders reacted favourably to remarks by German Chancellor Angela Merkel during her visit to Ottawa. She said Thursday that her country – which has Europe's biggest economy – is committed to doing everything it can to maintain the euro currency union.
There have also been high hopes that the U.S. Federal Reserve will announce another round of economic stimulus in September. But such a move has been thrown into doubt in the wake of recent positive economic data, including better than expected readings on job creation, retail sales and industrial production.
Analysts pointed to another element.
"I think it's that the absence of bad news has allowed for this slow but steady rise in equities," said Garey Aitken, director of equity research at Bissett Investment Management.
"I don't think anything has changed structurally, I don't think that by any means we're out of the woods yet. We're in a bit of a holding pattern and I think that with equity valuations being attractive in a very low interest rate environment, that no news has just allowed for a bit of a rotation from fixed income into equities."
The TSX tech sector led advances with Celestica Inc. (TSX:CLS) ahead 10 cents to C$7.98.
The base metals sector was close behind, up 0.65 per cent as copper added to Thursday's three-cent advance, up another three cents to US$3.41 a pound. Prices for the metal, viewed as an economic bellwether as it is used in so many industries, gave up ground earlier this week in the wake of weak Chinese export growth data and much lower than expected Japanese economic growth in the second quarter. Teck Resources (TSX:TCK.B) climbed 24 cents to C$29.63.
The energy sector gained 0.2 per cent with the September crude contract on the New York Mercantile Exchange off 21 cents at US$95.39 a barrel following a strong gain of more than $1 on Thursday. Suncor Energy (TSX:SU) was ahead 13 cents to C$32.19.
Financials were also positive with TD Bank (TSX:TD) ahead 39 cents to $80.87.
The gold sector slipped 0.8 per cent with bullion prices down $3.80 to US$1,615.40 an ounce. Barrcick Gold Corp. (TSX:ABX) faded 39 cents to C$35.21.
Apple's stock set a new high after a four-month swoon as investors looked ahead to the release of a new iPhone model and, possibly, a smaller iPad. Already the world's most valuable company, Apple Inc. saw its stock hit US$644.13 in morning trading Friday before retreating slightly.
Facebook Inc. shares continued to fall, though not as fast. On Friday they fell another 78 cents to $19.09 after hitting a fresh, all-time low of $19.05, a far cry from the $45 level the social networking site hit the day of its Initial Public Offering in May. Prices started to tumble Thursday as the post-IPO offering lockup on about 271 million shares expired, making them available for insiders to sell on the open market.
European bourses were positive, with London's FTSE 100 index up 0.14 per cent, Frankfurt's DAX up 0.41 per cent and the Paris CAC 40 up 0.16 per cent.