* Canadian dollar rises 0.1% against greenback * Canada's trade deficit narrows to C$978 million in Sept. * Price of U.S. oil increases 0.9% * Canadian bond prices fall across steeper yield curve TORONTO, Nov 5 (Reuters) - The Canadian dollar rose to near a one-week high against its U.S. counterpart on Tuesday as data showed a narrowing in Canada's trade deficit and investors became more optimistic of a trade deal between the United States and China. At 9:34 a.m. (1434 GMT), the Canadian dollar was trading 0.1% higher at 1.3139 to the greenback, or 76.11 U.S. cents. The currency touched its strongest intraday level since Oct. 30 at 1.3116. World shares climbed back towards record highs as hopes that Washington may roll back some of the tariffs it has imposed on Chinese imports rekindled optimism about the global economic outlook. Canada is a major exporter of commodities, including oil, so its economy could benefit from a pickup in global growth. U.S. crude prices rose 0.9% to $57.06 a barrel, buoyed by prospects of a U.S.-China trade deal. Canada's trade deficit narrowed in September to C$978 million, compared with a revised August deficit of C$1.24 billion, as exports and imports declined, data from Statistics Canada showed. Separate data from the Toronto Real Estate Board (TREB) showed that Toronto's housing market tightened in October, with the average price rising 5.5% on a year-over-year basis. The Bank of Canada has worried that an interest rate cut could trigger higher financial vulnerabilities, such as too much borrowing by Canadians. Canadian government bond prices were lower across a steeper yield curve in sympathy with U.S. Treasuries. The two-year fell 5 Canadian cents to yield 1.623% and the 10-year was down 52 Canadian cents to yield 1.584%. The gap between Canada's 2- and 10-year yields narrowed by 3.1 basis points to a spread of 3.9 basis points in favor of the shorter-dated bond, the narrowest gap since July 30. (Reporting by Fergal Smith Editing by Paul Simao)
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