CANADA FX DEBT-Canadian dollar climbs to 1-month high in ‘risk-on’ move

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 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar strengthens 0.3% against the greenback
    * Touches its strongest since Sept. 7 at 1.2540
    * Price of U.S. oil settles 1.1% higher
    * Canadian 10-year yield hits a 4-1/2-month high at 1.559%

    By Fergal Smith
    TORONTO, Oct 7 (Businesshala) - The Canadian dollar rose against
the greenback on Thursday as investors cheered a potential deal
to avoid a default on U.S. government debt and the Bank of
Canada said that the factors driving inflation were more
persistent than expected.
    The loonie        was trading 0.3% higher at 1.2547 to the
greenback, or 79.70 U.S. cents, after touching its strongest
level since Sept. 7 at 1.2540.
    The currency benefited from the uptick in risk appetite,
said Eric Theoret, global macro strategist at Manulife
Investment Management.
    "We are seeing a classic risk-on move," Theoret said. 
    U.S. stocks climbed in a broad-based rally after a temporary
truce in the debt-ceiling standoff in the U.S. Congress relieved
concerns of a possible government debt default later this month.
             
    Canada is a major producer of commodities, including oil, so
the loonie tends to be sensitive to shifts in risk appetite.
    U.S. crude oil futures        settled 1.1% higher at $78.30
a barrel as the market deemed it unlikely that the United States
would release emergency crude reserves or ban exports to ease
tight supplies.             
    Still, analysts see less room for the Canadian dollar to
gain ground over the coming year as the prospect of slower
global economic growth and accelerating inflation undermine
support from higher oil prices.             
    The factors influencing Canada's red-hot inflation are
proving more persistent than previously thought, but there are
"good reasons to believe" they remain temporary, Bank of Canada
Governor Tiff Macklem said.             
    Canada's jobs report for September is due on Friday, which
could offer clues on the strength of the domestic economy.
    Canadian government bond yields were higher across the
curve. The 10-year             rose as much as 5 basis points to
1.559%, its highest level since May 21, while the 2-year touched
its highest since March last year at 0.626%.

 (Reporting by Fergal Smith; Editing by Kirsten Donovan and
Sandra Maler)
  
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