CANADA FX DEBT-C$ up but pares some gains after factory data disappoints

    * Canadian dollar at C$1.2787, or 78.20 U.S. cents
    * Canadian manufacturing sales fall 0.4 percent in October
    * U.S. crude prices advance 0.6 percent
    * Bond prices lower across a flatter yield curve

    TORONTO, Dec 15 (Reuters) - The Canadian dollar edged higher
against its U.S. counterpart on Friday as oil prices rose, but
some of the currency's gains were pared after domestic data
showed a surprise drop in factory sales.
    Manufacturing sales fell 0.4 percent in October, pulled down
by weak sales of autos and other transportation equipment, data
from Statistics Canada indicated. Analysts had forecast a 0.8
percent increase.             
    The loonie got a boost on Thursday after Bank of Canada
Governor Stephen Poloz said in a speech that the central bank
was increasingly confident the economy will need less stimulus
over time. The currency gave up some of those gains after dovish
remarks by Poloz in a subsequent interview.
    U.S. crude prices        gained 0.6 percent to $57.4 a
barrel, supported by a pipeline outage in the North Sea.
             Oil is one of Canada's major exports.
    At 9:18 a.m. ET (1418 GMT), the Canadian dollar          was
trading at C$1.2787 to the greenback, or 78.20 U.S. cents, up
0.1 percent. The currency traded in a range of C$1.2740 to
    On Thursday, it touched its strongest in more than one week
at C$1.2713.    
    The U.S. dollar        edged higher against a basket of
major currencies as the United States Congress wrangled over a
bill to change the tax code.                 
    More than a quarter of Canadian firms could move part of
their operations to the United States amid uncertainty over the
future of the North American Free Trade Agreement, the nation's
export credit agency said on Friday.             
    Canadian government bond prices were lower across a flatter
yield curve, with the two-year            down 3.5 Canadian
cents to yield 1.566 percent and the 10-year             falling
8 Canadian cents to yield 1.865 percent.

 (Reporting by Fergal Smith; Editing by Susan Thomas)