TORONTO The Canadian dollar strengthened against its U.S. counterpart on Tuesday, shaking off an escalated lumber dispute with the U.S. as oil prices rose, while the greenback lost ground against a basket of major currencies.
Prices of oil, one of Canada's major exports, rose for a fourth consecutive session but worries over persistent oversupply capped gains.
The U.S. dollar fell, pressured by strength in the euro after European Central Bank President Mario Draghi opened the door to tweaks that might begin to reduce the central bank's emergency stimulus to the economy shortly.
Escalating a trade dispute with Canada in the run-up to talks on renegotiating NAFTA, the U.S. Commerce Department on Monday imposed preliminary anti-dumping duties on Canadian softwood lumber of up to 7.72 percent.
At 9:17 a.m. ET (1317 GMT), the Canadian dollar was trading at C$1.3203 to the greenback, or 75.74 U.S. cents, up 0.3 percent.
The currency's weakest level of the session was C$1.3260, while it touched its strongest since June 19 at C$1.3197.
Gains for the loonie came ahead of remarks on Wednesday by Bank of Canada Governor Stephen Poloz, who will be participating in a panel discussion at the European Central Bank's Forum on Central Banking.
Data on Friday showing weaker-than-expected domestic inflation has reduced the chances of an interest rate hike next month from the Bank of Canada. But analysts expect policymakers to stay hawkish amid concern that rates have been low for too long.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries and German Bunds. The two-year price fell 7 Canadian cents to yield 0.942 percent and the 10-year declined 48 Canadian cents to yield 1.518 percent.
Canada's gross domestic product data for April is due on Friday. Also on Friday, the Bank of Canada will release its business outlook report.
(Reporting by Fergal Smith; Editing by Nick Zieminski)