CANADA FX DEBT-C$ at 7-week high vs greenback, boosted by oil

(Adds analyst comment, updates prices to close)
    * Canadian dollar settles at C$1.2853, or 77.42 U.S. cents
    * Bond prices lower across the maturity curve

    By Alastair Sharp
    TORONTO, Aug 16 (Reuters) - The Canadian dollar strengthened
to a seven-week high against its broadly weaker U.S. counterpart
on Tuesday as oil rose and domestic data showed a rebound in
factory sales.
    The greenback was pummeled by investors tempering bets on
the timing and pace of U.S. Federal Reserve rate hikes.
    But unless prices for oil - a major Canadian export - rally
further, strategists see little chance of the Canadian
currency's recent gains.
    "I think we'll see this trend disconnect and I think we'll
see the loonie give up some of the more recent ground it's
gained," said Scott Smith, senior market analyst at Cambridge
Global Payments. 
    The Canadian dollar ended the day trading at
C$1.2853 to the greenback, or 77.80 U.S. cents, firmer compared
with Monday's close of C$1.2917, or 77.42 U.S. cents.
    The currency's weakest level of the session was C$1.2933,
and it touched its strongest since June 24 at C$1.2798.
    Oil rose 2 percent, hitting five-week highs for a second
straight day as sources at OPEC spoke of Saudi Arabia's apparent
desire for higher crude prices while Russia met with the cartel
to discuss the market. 
    Canadian factory sales increased 0.8 percent in June from
May as sales of machinery and transportation equipment grew,
according to Statistics Canada data. 
    Domestic retail sales and inflation data are due at the end
of the week.
    "There needs to be a stark rebalancing, a stark selloff in
the loonie to get back to those levels that are going to
stimulate business investment and stimulate export growth,"
Cambridge's Smith said.
    Weak U.S. business investment has hampered a long-awaited
pick-up in growth of Canada's non-energy exports, economists
say, while a weaker Canadian dollar has not helped exports as
much as expected. 
    Canadian government bond prices were lower across the
maturity curve, with the two-year bond down 3.5
Canadian cents to yield 0.567 percent and the benchmark 10-year
 down 19 Canadian cents to yield 1.066 percent.

 (Additional reporting by Fergal Smith, editing by G Crosse)