C$ strengthens as commodity investors bet on U.S. stimulus

(Adds analyst quotes and details throughout; updates prices)

* Canadian dollar rises 0.3% against greenback

* Price of U.S. oil settles up 1.7%

* Loonie touches strongest level in five days at 1.3342

* Canadian bond yields ease across much of a flatter curve

By Fergal Smith

TORONTO, Aug 4 (Reuters) - The Canadian dollar rose to a five-day high against its U.S. counterpart on Tuesday as the prospect of more U.S. economic stimulus boosted oil prices and data showed expansion in Canada's manufacturing sector for the first time in five months.

The loonie was trading 0.3% higher at 1.3354 to the greenback, or 74.88 U.S. cents. The currency touched its strongest intraday level since last Thursday at 1.3342.

"All commodities are rallying and the Canadian dollar can't help but follow along with that," said Adam Button, chief currency analyst at ForexLive.

Canada is a major producer of commodities, including gold , which notched a record high above $2,000 an ounce, and oil. U.S. crude oil futures settled 1.7% higher at $41.70 a barrel, supported by hopes the White House and lawmakers in the U.S. Congress are getting closer to a deal on a new economic stimulus package and signs America is making progress in curbing the spread of the novel coronavirus.

"The commodity market is signaling a lot of optimism," Button said.

The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) rose to a seasonally adjusted 52.9 in July from 47.8 in June. It was the first time since February that the index was above the 50 threshold, indicating expansion in the sector, and the highest reading since January 2019.

Canada's jobs report for July is due on Friday.

The loonie has rallied nearly 10% since March. Its advance on Tuesday came as the U.S. dollar , which had its worst month in a decade in July, lost ground against a basket of major currencies.

Canadian government bond yields eased across much of a flatter curve on Tuesday, with the 10-year down 3 basis points at 0.438%. On Friday, it touched its lowest intraday level since March 9 at 0.412%. (Reporting by Fergal Smith Editing by Nick Zieminski and Paul Simao) ((fergal.smith@thomsonreuters.com; +1 416 941 8113;)) Keywords: CANADA FOREX/ (UPDATE 1)

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