September 18, 2018 / 1:20 PM / 3 months ago

CANADA FX DEBT-C$ rises as factory data backs October rate hike view

    * Canadian dollar at 1.3002 to the greenback, or 76.91 U.S.
cents
    * Canadian factory sales rise 0.9 percent in July
    * Price of U.S. oil rises 1.4 percent  
    * Bond prices lower across a steeper yield curve

    By Fergal Smith
    TORONTO, Sept 18 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Tuesday as oil
prices rose and domestic manufacturing data supported the view
that the Bank of Canada will raise interest rates further in
October.
    Canadian factory sales grew by 0.9 percent in July from June
on higher sales in the transportation equipment industry,
Statistics Canada said. Analysts surveyed by Reuters had
forecast an increase of 0.6 percent.             
    "Canadian factories continued to hum in July," Avery
Shenfeld, chief economist at CIBC Capital Markets, said in an
email. "The data give some upside to our Q3 GDP forecast, and
underscore that the Bank of Canada is positioned to hike in
October as long as NAFTA talks don't blow up."
    The central bank has raised interest rates four times since
July 2017. Money markets see a nearly 80 percent chance of
another hike in October.           
    The price of oil, one of Canada's major exports, climbed on
signs that the Organization of the Petroleum Exporting Countries
would not be prepared to raise output to address shrinking
supplies from Iran and as Saudi Arabia signaled it was in no
rush to bring prices down.             
    U.S. crude        prices were up 1.4 percent at $69.89 a
barrel.
    At 8:58 a.m. (1258 GMT), the Canadian dollar          was
trading 0.3 percent higher at 1.3002 to the greenback, or 76.91
U.S. cents. The currency traded in a range of 1.2995 to 1.3065. 
   
    The gain for the loonie came despite an escalation in the
China-U.S. trade war.             
    Canada runs a current account deficit, so its economy could
be hurt if the global flow of trade or capital slows.
    The country has its own trade feud with the United States
and is also in talks to revamp the North American Free Trade
Agreement.
    Canadian Foreign Minister Chrystia Freeland on Monday said
she would return to Washington, this week for fresh talks on
NAFTA as time is running very short to meet a U.S. demand for a
deal by October 1.             
    Canadian government bond prices were lower across a steeper
yield curve, with the 10-year yield approaching its highest in
nearly six weeks. The 10-year             declined 15 Canadian
cents to yield 2.359 percent.
    Canada's inflation report for August and July retail sales
data are due on Friday.

 (Reporting by Fergal Smith
Editing by Susan Thomas)
  
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