CANADA FX DEBT-Canadian dollar rises to 10-day high as factory data beats estimates

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 CAD= 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 CLc1 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 CA10YT=RR was down 2.4 basis points at 3.165%.