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CANADA FX DEBT-Loonie notches 11-week high as 'risk-on' boosts commodity currencies

By Fergal Smith

(Adds strategist quotes and details on activity; updates prices) * Canadian dollar rises 0.4% against the greenback * Loonie touches its strongest since July 31 at 1.3131 * Canadian manufacturing sales increase by 0.8% in August * Canada's 10-year yield posts a three-month high at 1.608% By Fergal Smith TORONTO, Oct 17 (Reuters) - The Canadian dollar climbed to its strongest in more than two months against its U.S. counterpart on Thursday as investors welcomed an eleventh-hour Brexit deal and domestic data showed a stronger-than-expected gain for factory sales in August. Global stocks rose after Britain reached a deal to avoid a disorderly divorce from the European Union that could have hurt the global economy. "You can put most of it (the Canadian dollar rally) down to the general risk-on sentiment that we've seen benefit commodity currencies," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. Canada, like Australia and New Zealand, is a major commodities exporter, so its economy could benefit from an improved global growth outlook. Canadian manufacturing sales increased by 0.8% in August from July on higher motor vehicle sales, as well as fabricated metal products, data from Statistics Canada showed. Analysts had forecast a 0.6% increase. "You can make the case that the global weakness that we've seen has been slow to seep into both non-energy exports and manufacturing sales in Canada," Chandler said. The Bank of Canada has left its benchmark interest rate on hold this year at 1.75% even as some of its global peers, including the Federal Reserve and the European Central Bank, have eased. Its next rate decision is on Oct. 30. Separate data from payroll services provider ADP showed that Canada added 28,200 jobs in September, building on a blockbuster increase of 109,900 in an upwardly revised reading for the previous month. At 3:54 p.m. (1954 GMT), the Canadian dollar was trading 0.4% higher at 1.3142 to the greenback, or 76.09 U.S. cents. The currency reached its strongest intraday level since July 31 at 1.3131. The gain for the loonie came as U.S. House Speaker Nancy Pelosi said lawmakers were getting closer to an agreement with the Trump administration on revisions to the deal negotiated by the Trump administration with Canada and Mexico. Canada sends about 75% of its exports to the United States, including oil. U.S. crude oil futures settled 1.1% higher at $53.93 a barrel despite a larger-than-expected rise in U.S. crude stockpiles. Canadian government bond prices were lower across the yield curve, with the two-year down 2.8 Canadian cents to yield 1.659% and the 10-year falling 18 Canadian cents to yield 1.567%. The 10-year yield touched its highest intraday level since July 16 at 1.608%. (Reporting by Fergal Smith Editing by Chizu Nomiyama and Richard Chang)