A string of robust economic news pushed the Bank of Canada to hike rates for the second time in three months, a move that helped drive the loonie nearly 2 percent higher last week. The July move was the Bank's first hike in nearly seven years.

"The story has changed when it comes to Canada's economy," said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets.

"Once, the loonie was a global currency that you would look to sell on strength. Now, I think it's fair to say the international community looks to the Canadian dollar as a currency you want to buy on weakness."

The 2-year yield, which has jumped as much as 99 basis points since mid-May, touched its highest since June 2011 at 1.643 percent, before pairing gains. The yield stood at 1.548 percent.