TORONTO: The Canadian dollar strengthened to a near three-month high against its U.S. counterpart on Tuesday as global stocks added to recent gains and ahead of an interest rate decision by the Bank of Canada on Wednesday.

World stocks climbed to three-month highs as the global coronavirus recovery effort won out over U.S.-China tensions and the worst civil unrest in the United States in decades.

Canada runs a current account deficit and is a major producer of commodities, including oil, so its economy could particularly benefit from a pickup in the global flow of trade and capital.

Oil prices rose to near three-month highs on expectations that major producers would agree to extend output cuts that have shored up prices.

U.S. crude oil futures were up 1.2pc at $35.88 a barrel.

The Canadian dollar was trading 0.3pc higher at 1.3530 to the greenback, or 73.91 U.S. cents.

The currency touched its strongest intraday level since March 9 at 1.3493.

Recent gains for the loonie have come as the U.S. dollar lost its safe-haven shine.

The greenback on Tuesday extended its decline since March against a basket of major currencies.

Economists say that Canada's economy likely bottomed out in April when non-essential businesses across the country were closed to help contain the coronavirus pandemic.

Attention has been turning to how fast the economy can recover and the potential level of fiscal and monetary policy support.

The Bank of Canada is expected to hold interest rates at a record low of 0.25pc on Wednesday, when Tiff Macklem will begin his seven-year term as governor of the central bank.

Canadian government bond yields were higher across a steeper curve, with the 10-year up 2.2 basis points at 0.556pc.