C$ rebounds from 2-week low on reviving of U.S.-China trade talks


(Adds strategist quotes and details throughout, updates prices)

* Canadian dollar rises 0.2% against the greenback

* Price of U.S. oil increases 3.8%

* Canadian factory sales fall by 0.6% in April

* Gap between 2- and 10-year yields hits narrowest in 12 years

By Fergal Smith

TORONTO, June 18 (Reuters) - The Canadian dollar strengthened on Tuesday against the greenback, recovering from an earlier two-week low, as the revival of trade talks between the United States and China bolstered prospects for the global economy.

U.S. President Donald Trump said he had spoken to Chinese President Xi Jinping and that the two leaders' teams would restart trade talks after a long lull in order to prepare for a meeting at the G20 summit later this month.

"That eases the anxiety that was surrounding trade," said Alfonso Esparza, a senior currency analyst at OANDA. "Growth forecasts are going to be less pressured by the trade war narrative."

Canada exports many commodities, including oil, so its economy could benefit from improved prospects for global trade.

The price of oil was boosted by the trade talks news. U.S. crude oil futures settled 3.8% higher at $53.90 a barrel.

At 4 p.m. (2000 GMT), the Canadian dollar was trading 0.2% higher at 1.3380 to the greenback, or 74.74 U.S. cents. The currency's strongest level of the session was 1.3375, while it touched its weakest level since June 4 at 1.3433.

Canadian factory sales fell by 0.6% in April from March as motor vehicle sales were held back by temporary assembly plant shutdowns, Statistics Canada said. Analysts had forecast a 0.4% increase.

China will block pork imports from a third Canadian firm after a shipment was found to contain the banned feed additive ractopamine, the customs agency said, deepening a trade and diplomatic dispute with Canada.

Canadian government bond prices were mixed across a flatter yield curve, with the two-year flat to yield 1.401 percent and the 10-year rising 28 Canadian cents to yield 1.425%.

The 10-year yield hit its lowest intraday since June 2017 at 1.383%, while the gap between the two- and 10-year yields narrowed by 2.9 basis points to a spread of 2.4 basis points, its smallest since August 2007.

Canada's inflation report for May is due on Wednesday. (Reporting by Fergal Smith; Editing by Bernadette Baum and Peter Cooney) ((fergal.smith@thomsonreuters.com; +1 416 941 8113;)) Keywords: CANADA FOREX/ (UPDATE 1)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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