* Canadian dollar at C$1.2794, or 78.16 U.S. cents
* Canadian factory sales rise 1.4 percent in March
* Bond prices lower across much of the yield curve
By Fergal Smith
TORONTO, May 16 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday, boosted by higher stock prices and domestic data showing better-than-expected growth in manufacturing sales.
Canadian factory sales rose 1.4 percent in March, surpassing the 1.2 percent gain expected by economists, and February's increase was upwardly revised to 2.7 percent from a previously reported 1.9 percent, Statistics Canada said. market likes the headline nominal gain and also the revision higher," said Bipan Rai, North America Head, FX Strategy at CIBC Capital Markets.
Wall Street rose, with the small cap Russell 2000 index .RUT hitting a record. The commodity-linked Canadian dollar is sensitive to movement in equity markets due to the signal that stocks sends about prospects for global growth. commodity-linked currencies, such as the Australian dollar AUD= and the New Zealand dollar NZD= , also climbed.
U.S. crude oil futures CLc1 settled 0.3 percent higher at $71.49 a barrel. Oil is one of Canada's major exports. O/R
At 4 p.m. EDT (2000 GMT), the Canadian dollar CAD=D4 was trading 0.6 percent higher at C$1.2794 to the greenback, or 78.16 U.S. cents. The currency traded in a range of C$1.2777 to C$1.2878.
Uncertainty about North American Free Trade Agreement renegotiations is one of the reasons the Bank of Canada has kept interest rates low, because concern about U.S. trade policy is dragging down business investment, Deputy Governor Lawrence Schembri said.
The United States is pushing for a deal in negotiations on a revised NAFTA trade deal, the White House said, but Canadian and Mexican officials were not due in Washington for talks before a Thursday deadline. market is thinking, over the next little while something is going to be stitched together," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.
Canada sends about 75 percent of its exports to the United States, so its economy could benefit if a NAFTA deal is reached.
On a matter unrelated to NAFTA, Finance Minister Bill Morneau said on Wednesday Canada's government was prepared to indemnify Kinder Morgan (NYSE:KMI) Canada Ltd's KML.TO proposed Trans Mountain pipeline expansion against unnecessary delays that are politically motivated. government bond prices were lower across much of the yield curve, with the two-year CA2YT=RR down 3.5 Canadian cents to yield 2.057 percent and the 10-year CA10YT=RR falling 14 Canadian cents to yield 2.501 percent.
On Tuesday, the 10-year yield touched its highest intraday level since April 2014 at 2.521 percent.