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Canadian dollar gains 0.4% against the greenback

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Touches its strongest since September 5

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Factory sales rise 2.5% in July, beating estimates

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Bond yields track U.S. Treasury yields lower

By Fergal Smith

TORONTO, Sept 15 (Reuters) - The Canadian dollar

strengthened to a 10-day high against its U.S. counterpart on

Monday as Canada's manufacturing sector, which is heavily

exposed to trade uncertainty, showed signs of recovery and ahead

of a Bank of Canada interest rate decision this week.

The loonie was trading 0.4% higher at 1.3780 per U.S.

dollar, or 72.57 U.S. cents, its strongest intraday level since

September 5.

"It's a good start to the week," said Adam Button, chief

currency analyst at ForexLive. "The market is on edge about the

manufacturing sector and to get some solid numbers right in the

heart of the summer demonstrates some resilience in the

economy."

Canadian factory sales grew by 2.5% in July from June on

higher sales of motor vehicles, as well as petroleum and coal

products. Economists had forecast an increase of 1.8%.

Separate data showed that wholesale trade was up 1.2% in July

and that home sales rose in August for a fifth straight month.

Still, investors are betting that the Bank of Canada will resume

its easing campaign on Wednesday. The central bank has left its

benchmark interest rate on hold at 2.75%, the middle of the

so-called neutral range, since March.

"The market is going to look to guidance from the Bank of

Canada ," Button said. "How deep into dovish territory are they

willing to go at this junction?"

The price of oil was another tailwind for the loonie,

rising 1% to $63.32 a barrel as investors assessed the impact of

Ukrainian drone attacks on Russian refineries. Oil is one of

Canada's major exports.

Canadian bond yields eased across the curve, tracking moves

in U.S. Treasuries. The 10-year was down 2.4 basis

points at 3.165%.