* Canadian dollar rises 0.2 percent against the greenback
* Canadian manufacturing sales rise 0.2 percent in September
* Canadian bond prices move higher across the yield curve
* Canada-U.S. 2-year spread narrows by 3.4 basis points
By Fergal Smith
TORONTO, Nov 16 (Reuters) - The Canadian dollar strengthened to its highest in more than one week against its U.S. counterpart on Friday, extending this week's gain as the greenback broadly fell and domestic data showed that factory sales edged higher in September.
At 4:42 p.m. (2142 GMT), the Canadian dollar CAD=D4 was trading 0.2 percent higher at 1.3151 to the greenback, or 76.04 U.S. cents.
The currency touched its strongest level since Nov. 8 at 1.3128. For the week, the loonie was up 0.4 percent.
The U.S. dollar .DXY fell broadly in the wake of cautious comments from two U.S. Federal Reserve officials about global economic growth. have seen a little bit of broadbased U.S. dollar weakness, stronger oil and a stronger Canadian dollar," said Rahim Madhavji, president at Knightsbridge Foreign Exchange. "The loonie and oil are highly correlated."
The price of oil, one of Canada's major exports, was supported by expectations that the Organization of the Petroleum Exporting Countries would agree to cut output next month, though prices were set for a weekly drop on underlying oversupply worries. O/R
Canadian factory sales rose 0.2 percent in September from August on higher shipments of autos as production ramped up after a series of assembly plant shutdowns, Statistics Canada said. Analysts in a Reuters poll had forecast a 0.3 percent gain. separate domestic data, net foreign investment in Canadian securities jumped to C$7.70 billion in September from a year-low C$2.63 billion in August on higher purchases of money market paper. have added slightly to their bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Nov. 13, net short positions had increased to 2,791 contracts from 2,632 a week earlier. government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR rose 4 Canadian cents to yield 2.219 percent and the 10-year CA10YT=RR climbed 21 Canadian cents to yield 2.364 percent.
The gap between Canada's 2-year yield and its U.S. equivalent narrowed by 3.4 basis points to a spread of 58.9 basis points in favor of the U.S. bond.