* C$ at 92.66 U.S. cents
* Bonds lower after U.S. economic data
(Adds details, quote)
By Jennifer Kwan
TORONTO, Sept 15 (Reuters) - Canada's dollar rose against the greenback on Tuesday morning, boosted by reassuring U.S. retail sales data that helped to fuel optimism about economic recovery.
The currency benefited from government data that showed sales at U.S. retailers rose at their fastest pace in three-and-half years in August, while a gauge of manufacturing in New York State hit a near two-year high. [ID:nN15548319]
"The initial reaction from the market to the U.S. retail sales was a very sharp turn in risk sentiment from risk aversion to risk appetite. Immediately commodity-based currencies benefited from that," said Matthew Strauss, senior currency strategist, RBC Capital Markets.
At 9:18 a.m. (1318 GMT), the Canadian unit was at C$1.0792 to the U.S. dollar, or 92.66. U.S. cents, up from Monday's close at C$1.0835 to the U.S. dollar, or 92.29 U.S. cents.
The U.S. currency also gained following the data. [FRX/]
As the recovery gains traction, analysts said the U.S. dollar should find more support from strong domestic data. In recent months, the dollar has often weakened on strong U.S. data because it reduced safe haven demand for the currency.
"Sooner or later good data is going to be good for the dollar," said Steve Butler, director of foreign exchange trading, Scotia Capital.
Canadian data had little impact on the currency and bonds. Labor productivity in Canadian businesses was unchanged in the second quarter, Statistics Canada said on Tuesday, marking five straight quarters of stagnation. [ID:nN15307691]
A firmer price of oil CLc1, a key Canadian export, helped to support the currency's move higher. [O/R] Moves in the Canadian currency can often be swayed by the direction of commodities prices.
But a cloud may hang over the domestic currency this week. The Canadian political scene is in play with the risk of an election raised earlier this month by the country's main opposition Liberals.
Recent opinion polls give the Conservatives, which have a minority government, a lead over the Liberals.
"I guess until Friday when the confidence (vote) comes down that uncertainty may play out and may weigh on the Canadian dollar a bit," said Sal Guatieri, senior economist, BMO Capital Markets.
Canadian bond prices were mostly lower across the curve, as the reassuring U.S. economic data sent investors to riskier assets. [ID:nN15531894]
The two-year bond CA2YT=RR fell 2 Canadian cent to C$99.53 to yield 1.244 percent, while the 10-year bond CA10YT=RR drooped 11 Canadian cents to C$103.02 to yield 3.381 percent. The 30-year bond CA30YT=RR retreated 15 Canadian cents to C$118.25 yield 3.914 percent. (Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)