* Canadian dollar at C$1.1013 or 90.80 U.S. cents
* Bond prices mixed across the maturity curve
By Leah Schnurr
TORONTO, Sept 16 (Reuters) - The Canadian dollar
strengthened against the greenback on Tuesday after data showed
factory sales rose strongly in July, with the currency extending
its recovery from the more than five-month low it hit the
previous session.
Markets were looking ahead to a speech by the head of the
Bank of Canada later in the day. In his first speech since the
central bank reaffirmed its neutral policy stance earlier this
month, Governor Stephen Poloz will talk on the topic of the role
of a floating exchange rate. A press conference will follow.
"I don't think he will deviate too much from what we have
heard on multiple occasions from the Bank of Canada and Mr.
Poloz in particular," said Martin Schwerdtfeger, FX strategist
at TD Securities in Toronto.
"Relatively recently he has stressed while weaker Canadian
dollar might be supportive for some of the Canadian exports, on
the other hand it also hinders fixed investment because it makes
imported capital goods more expensive."
The Canadian dollar had headed into the day's data on a
strong footing and then added to its gains after the factory
sales report showed a 2.5 percent increase in July, a much
faster pace than had been expected.
Given the magnitude of that gain, the U.S. dollar might have
been expected to retreat further against the loonie, but there
is interest to buy the greenback on dips ahead of a statement by
the U.S. Federal Reserve on Wednesday, Schwerdtfeger said.
The Canadian dollar was at C$1.1013 to the
greenback, or 90.80 U.S. cents, stronger than Monday's close of
C$1.1050, or 90.50 U.S. cents.
Wednesday's policy statement from the Fed will likely be the
biggest event of the week as investors speculate that the
central bank could provide insight on when it will start to
raise interest rates.
Any hint that a rate hike will come sooner rather than later
would likely boost the greenback against the loonie. A two-day
Fed policy meeting was set to begin on Tuesday.
After a drop of nearly 2 percent last week, the Canadian
dollar touched the C$1.11 level in Monday's overnight session,
but it was unable to push through that resistance barrier and
has rallied since.
A U.S. dollar rally that has lasted for several weeks was
starting to look a bit tired, Schwerdtfeger said.
"In terms of the technicals, I think there is a risk now
that we could see a drop toward C$1.0975, but we'll have to
wait. (There are) too many event risks over the next two or
three days to see where the trend firms."
Canadian government bond prices were mixed across the
maturity curve, with the two-year unchanged to yield
1.152 percent and the benchmark 10-year down 1
Canadian cent to yield 2.238 percent.
(Editing by Peter Galloway)