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CANADA FX DEBT-C$ edges higher, boosted by manufacturing sales gain

* Canadian dollar at C$1.2750, or 78.43 U.S. cents

* Manufacturing sales rise 0.5 percent in September

* Bond prices lower across the yield curve

TORONTO, Nov 16 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Thursday as data showing a surprise rise in domestic manufacturing sales in September offset lower oil prices. The 0.5 percent increase in manufacturing sales topped economists' forecasts for a 0.3 percent decline, while volumes rose 0.7 percent. The data was "modestly positive for the Canadian dollar," Nick Exarhos, an economist at CIBC Capital Markets, said in a research report. "But the narrow scope of the increase and the still troubling trend in export volumes continues to point to reasons for concern ahead." Prices of oil, one of Canada's major exports, dipped on rising U.S. crude production and inventories.

U.S. crude prices were down 0.27 percent at $55.18 a

barrel. Investors have also been focusing this week on the resumption of North American Free Trade Agreement renegotiations. NAFTA working groups began meeting on Wednesday in Mexico. Talks will begin on Friday and continue through Nov. 21. A cautious approach to monetary policy may be prudent during times of uncertainty like today, but caution has its limits because the trade-off can be financial instability, Bank of Canada Senior Deputy Governor Carolyn Wilkins said on Wednesday.

At 9:20 a.m. ET (1420 GMT), the Canadian dollar was

trading at C$1.2750 to the greenback, or 78.43 U.S. cents, up 0.1 percent. The currency traded in a narrow range of C$1.2742 to C$1.2785. Canadian companies cut 5,700 workers from their payrolls in October, with the loss concentrated in the goods-producing sector, according to a new employment report from ADP.

Foreign investors bought a net C$16.81 billion in Canadian securities in September, led by Canadian bonds, following a revised C$9.77 billion acquisition in August, Statistics Canada said. Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries as global markets regained some of their risk appetite after a sharp sell-off in stocks over the past week.

The two-year fell 2.5 Canadian cents to yield 1.462 percent and the 10-year declined 19 Canadian

cents to yield 1.938 percent. Canada is due to auction C$500 million of its ultra-long bonds at 12:00 p.m. ET (1700 GMT). The country's inflation report for October will be released on Friday.

(Reporting by Fergal Smith; Editing by Susan Thomas)