The loonie, as the currency is colloquially known, is trading at its strongest in 14 months, helped by a hawkish turn from the Bank of Canada and an interest rate hike earlier this month.

At 8:49 a.m. ET (1249 GMT), it was trading at C$1.2512 to the greenback, or 79.92 US cents, up 0.2 percent. The currency's strongest level of the session was C$1.2511, its strongest since May 3, 2016, while its weakest was C$1.2552.

It has gained some 10 percent since early May, while the spread between yields of Canadian and US 2-year bonds has narrowed sharply since June and now sits at less than 10 basis points, its narrowest in more than a year.

Analysts are eyeing C$1.25, or 80 US cents, as a key barrier for the loonie, and then the 2016 high of C$1.2461.

Prices for oil, a major Canadian export, rallied after leading OPEC producer Saudi Arabia pledged to cut its exports to help speed up the rebalancing of global supply and demand.

Canada wholesale trade rose more than expected in May, driven by increased sales of motor vehicles and agricultural supplies, data from Statistics Canada showed.

Canadian government bond prices were lower across the maturity curve, with the two-year price down 2 Canadian cents to yield 1.261 percent and the benchmark 10-year  falling 13 Canadian cents to yield 1.900 percent.