Canadian dollar strengthens, boosted by factory sales gain

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as domestic data showed stronger-than-expected growth in manufacturing sales and the Trump administration said it was pushing for a deal on a revamped NAFTA.

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.

The United States is pushing for a deal in negotiations on a revised North American Free Trade Agreement and President Donald Trump is committed to getting a better agreement with Canada and Mexico, the White House said on Wednesday.

Canada sends about 75 percent of its exports to the United States, so its economy could benefit if a NAFTA deal is reached.

At 9:19 a.m. EDT (1319 GMT), the Canadian dollar was trading 0.3 percent higher at C$1.2834 to the greenback, or 77.92 U.S. cents. The currency traded in a range of C$1.2832 to C$1.2878.

Gains for the loonie came as Canadian Finance Minister Bill Morneau said that the government is prepared to indemnify Kinder Morgan Canada Ltd's (Toronto:KML.TO - News) proposed Trans Mountain pipeline expansion against unnecessary delays that are politically motivated.

Bank of Canada Deputy Governor Lawrence Schembri will give a speech on the challenges and opportunities of reaching economic potential. His prepared remarks will be released at 12:15 EDT (1615 GMT).

The central bank appears to be losing sway in its own backyard as bond yields there chase after rising U.S. interest rates even though Canadian policymakers have pledged to proceed slowly with rate hikes of their own.

The price of oil, one of Canada's major exports, eased after a rise in U.S. crude inventory added to signs demand may be slowing. U.S. crude prices were down 0.66 percent at $70.84 a barrel.

The U.S. dollar (.DXY) resumed its powerful, month long rally as the euro slumped to a five-month low after reports that a likely future Italian government would seek debt forgiveness from European creditors.

Canadian government bond prices were mixed across the yield curve, with the two-year down 0.5 Canadian cent to yield 2.041 percent and the 10-year rising 8 Canadian cents to yield 2.475 percent.

On Tuesday, the 10-year yield touched its highest intraday level since April 2014 at 2.521 percent.

(Reporting by Fergal Smith; editing by Jonathan Oatis)