Canadian dollar strengthens to nearly three-week high as oil rises

TORONTO (Reuters) - The Canadian dollar strengthened to a nearly three-week high against its U.S. counterpart on Tuesday as risk appetite and oil rose and domestic manufacturing data reinforced expectations that broad economic growth rebounded in the third quarter.

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

Manufacturing sales rose by 0.9 percent from July to hit C$51.12 billion, stronger than the 0.2 percent gain market analysts polled by Reuters had forecast. In volume terms, sales climbed by 1.2 percent.

“All in all it is a pretty decent report,” said Andrew Kelvin, senior rates strategist at TD Securities.

Kelvin doubted the data will have much impact on the Bank of Canada, which makes its interest rate decision on Wednesday. The central bank is expected to hold interest rates at 0.50 percent as it waits to see how the economic bounce-back it is anticipating in the second half of the year unfolds.

U.S. crude CLc1 prices were up 1.06 percent to $50.47 a barrel, helped by a weaker dollar and the notion that global markets oversupply may be moderating, ahead of a November meeting of OPEC producers that could decide to cut production. [O/R]

Rising commodity prices helped pull global stock markets higher.

Some losses for the U.S. dollar were pared as a rise in U.S. consumer prices suggested a steady build-up of inflation pressures that could keep the Federal Reserve on track to raise interest rates in December.

At 9:27 a.m. EDT (1327 GMT), the Canadian dollar CAD=D4 was trading at C$1.3076 to the greenback, or 76.48 U.S. cents, stronger than Monday's close of C$1.3130, or 76.16 U.S. cents.

The currency’s weakest level of the session was C$1.3133, while it touched its strongest since Sept. 29 at C$1.3051.

EU governments were set to fail to approve a free trade deal with Canada as they struggled to overcome regional opposition in Belgium that threatens to scupper the entire deal.

Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR price down 0.5 Canadian cent to yield 0.604 percent and the benchmark 10-year CA10YT=RR falling 16 Canadian cents to yield 1.239 percent.

Reporting by Fergal Smith; Editing by Bill Trott