CANADA FX DEBT-Canadian dollar rallies as vaccine hopes boost global stocks

    * Canadian dollar gains 0.4% against the greenback
    * Canadian manufacturing sales rise 10.7% in May
    * Price of U.S. oil increases 1.6%
    * Canada's 10-year             rises 1.9 basis points to

    By Fergal Smith
    TORONTO, July 15 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Wednesday as
investors grew more optimistic about a coronavirus vaccine and
domestic data showed a rebound in factory sales, with the
currency recovering from a two-week low the day before.
    Canadian manufacturing sales increased 10.7% in May
following a record 27.9% decline in April, Statistics Canada
said, as many manufacturers resumed operations following
COVID-19-related shutdowns.
    World shares          climbed towards a four-month high
after U.S. researchers reported that Moderna Inc's         
experimental vaccine for COVID-19 showed it was safe in an
ongoing early-stage study.                          
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so the loonie tends to
be sensitive to the global flow of trade and capital.
    U.S. crude        prices were up 1.6% at $40.95 a barrel
after a sharp drop in U.S. crude inventories.             
    The Canadian dollar        was trading 0.4% higher at 1.3563
to the greenback, or 73.73 U.S. cents. The currency, which on
Tuesday touched its weakest intraday level since June 30 at
1.3646, traded in a range of 1.3562 to 1.3617.
    The Bank of Canada is due to make an interest rate
announcement at 10 a.m. (1400 GMT). The central bank is expected
to leave its benchmark interest rate on hold at 0.25%, with
investors likely to focus on the bank's outlook for the economy
and potential guidance on its bond-buying program.             
    "We'll be watching for any discussion of how the BoC might
adjust its purchase program in reaction to last week's deficit
and issuance explosion in the federal fiscal snapshot," Benjamin
Reitzes, Canadian rates & macro strategist at BMO Capital
Markets, said in a note.
    Canada's budget deficit is forecast to hit C$343.2 billion
in the current fiscal year.                 
    Canada's 10-year             was up 1.9 basis points on
Wednesday at 0.555%.

 (Reporting by Fergal Smith
Editing by Nick Zieminski)