(New throughout, updates prices, market activity and details, adds strategist comments) * Canadian dollar strengthens 0.6% against the greenback * Touches its strongest level since July 6 at 1.2355 * Canadian factory sales rise 0.5% in August * Canadian 10-year yield eases 5.5 basis points to 1.547% By Fergal Smith TORONTO, Oct 14 (Reuters) - The Canadian dollar on Thursday strengthened to its highest level in more than three months against its U.S. counterpart, as higher oil prices bolstered the case for multiple Bank of Canada interest rate hikes next year. The loonie was trading 0.6% higher at 1.2370 to the greenback, or 80.84 U.S. cents, after touching its strongest level since July 6 at 1.2355. "I characterize it (the rally) as finally starting to catch up to the oil price fundamentals which argues that we should be looking at USD-CAD below 1.20," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. If oil were to stay at current levels it could help justify the Bank of Canada raising interest rates "several times next year," Anderson added. The price of oil , one of Canada"s major exports, settled 1.1% higher at $81.31 a barrel after top producer Saudi Arabia dismissed calls for additional OPEC+ supply and the International Energy Agency said surging natural gas prices could boost demand for oil among power generators. Crude has soared about 30% since August. Money markets expect three rate hikes in 2022 by the Bank of Canada, a faster pace of tightening than seen for the Federal Reserve, with expectations raised by data last Friday showing that Canada has added back all the jobs it lost during the pandemic. Data on Thursday added to evidence that the Canadian economy has recovered after a surprise contraction in the second quarter. Factory sales rose 0.5% in August from July. Gains for the loonie came as rising risk appetite put a brake on the safe-haven U.S. dollar"s recent rally. The Canadian 10-year yield eased 5.5 basis points to 1.547%, tracking the move in U.S. Treasuries, after touching on Tuesday its highest since January 2020 at 1.683%. (Reporting by Fergal Smith; Editing by Kirsten Donovan and David Gregorio) Our Standards: The Thomson Reuters Trust Principles.