* Canadian dollar climbs 0.7 percent against the greenback
* Canada reaches deal with United States to revamp NAFTA
* Loonie touches its strongest since May 22 at 1.2788
* Bond prices lower across the yield curve
By Fergal Smith
TORONTO, Oct 1 (Reuters) - The Canadian dollar strengthened to a four-month high against its U.S. counterpart on Monday after a last-minute deal to salvage the trilateral NAFTA trade pact supported bets for another Bank of Canada interest rate hike as soon as this month.
The new United States-Mexico-Canada Agreement (USMCA) largely leaves the broad North American Free Trade Agreement intact and maintains current supply chains that would have been fractured under weaker bilateral deals. deal, along with last week's solid run of data, all but cements a rate hike later this month, and will likely add an extra move next year," Robert Kavcic, a senior economist at BMO Capital Markets said in a research note.
The Bank of Canada has raised interest rates four times since July 2017. Chances of another hike in October have climbed to 84 percent from 77 percent before data on Friday showing stronger-than-expected domestic economic growth in July. 9:20 a.m. (1320 GMT), the Canadian dollar CAD=D4 was trading 0.7 percent higher at C$1.2816 to the greenback, or 78.03 U.S. cents.
The loonie, which posted on Friday its biggest gain in four months, touched its strongest since May 22 at 1.2788.
A report that Royal Dutch Shell (LON:RDSa) Plc RDSa.AS and some partners have approved a $31 billion liquefied natural gas project in western Canada could also provided support for the loonie. price of oil, one of Canada's major exports, was supported by supply concerns before U.S. sanctions against Iran come into force next month. U.S. crude CLc1 prices were up 0.1 percent at $73.31 a barrel.
Canadian government bond prices were lower across the yield curve, with the two-year CA2YT=RR down 10.5 Canadian cents to yield 2.274 percent and the 10-year CA10YT=RR falling 50 Canadian cents to yield 2.487 percent.
The 10-year yield touched its highest intraday since May 18 at 2.519 percent.
Canada's jobs data for September and August trade data are due on Friday.