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Canadian dollar gains 0.3% against the greenback

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Touches its strongest since July 22 at 1.3719

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Price of U.S. oil settles 2.8% higher

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Bond yields rise across the curve

By Fergal Smith

TORONTO, Aug 7 (Reuters) - The Canadian dollar

strengthened against its U.S. counterpart on Wednesday as

investors assessed whether the recent sell-off in the currency

had run its course and despite the Bank of Canada worrying about

the outlook for the domestic economy.

The loonie was trading 0.3% higher at 1.3750 per U.S.

dollar, or 72.73 U.S. cents, after touching its strongest

intraday level since July 22 at 1.3719.

The currency was extending its recovery from a near two-year

low at 1.3946, which it hit on Monday when Canadian financial

markets were closed and markets globally turned volatile.

Winding down of yen-funded carry trades and concern the

Federal Reserve has waited too long to cut interest rates

spooked investors in recent days.

"That volatility we saw in stocks on Monday, when Canada was

effectively out, probably was the low point for the Canadian

dollar," said Shaun Osborne, chief currency strategist at

Scotiabank.

"The market is extremely short Canadian dollars ... that

should be a bit of a warning light on the dashboard that the CAD

sell-off has possibly gone a bit too far."

Speculators have raised their bearish bets on the Canadian

dollar to an all-time high, recent data from the U.S. Commodity

Futures Trading Commission showed.

Ahead of their decision to cut rates last month, BoC

governors fretted that consumer spending in 2025 and 2026 could

be significantly weaker than expected, minutes of the meeting

showed.

MSCI's gauge of stocks across the globe

rose, while the price of oil, one of Canada's major

exports, bounced back from multi-month lows on concerns that an

escalating conflict in the Middle East could hurt oil

production. U.S. crude futures settled 2.8% higher at

$75.23 a barrel.

Canadian bond yields moved higher across the curve, tracking

moves in U.S. Treasuries. The 10-year was up 5.5

basis points at 3.172%.