TORONTO, Sept 8 (Reuters) - The Canadian dollar strengthened to nearly a three-week high against its U.S. counterpart on Tuesday as investors focused on higher oil prices rather than an escalating trade war between the U.S. and Canada.
The loonie was trading 0.2% higher at 1.3790 per U.S. dollar, or 72.52 U.S. cents, after touching its strongest intraday level since August 21 at 1.3760.
Canada's retaliatory tariffs on U.S. goods took effect after midnight, intensifying an 18-month-old trade war and spurring Prime Minister Mark Carney to urge a further shift away from the country's biggest trading partner.
On Monday, U.S. President Donald Trump said Canadian private jet maker Bombardier (BBDb.TO), opens new tab would no longer be allowed to sell its planes in the U.S. unless it started manufacturing in the country.
"Markets are increasingly tuning out tariffs and threats," said Adam Button, chief currency analyst at investingLive. "For all the angst, the economic impacts are still limited and the Canadian dollar is trading off oil."
Data on Friday showed Canada's economy lost 41,700 jobs in August. The unemployment rate, however, held steady at 6.4%.
Last week, the Bank of Canada said it does not expect new U.S. tariffs to have a large direct impact on the economy, adding that the ongoing Middle East conflict had raised upside risks to the inflation outlook.
U.S. crude oil futures touched a three-month high at $94.73 a barrel on Tuesday after Iran-backed Houthis in Yemen attacked Saudi energy facilities. Oil is one of Canada's major exports.
Canadian bond yields moved higher across the curve. The 10-year was up 2.3 basis points at 3.802% but held below a two-year high it touched during Friday's session at 3.834%.
Reporting by Fergal Smith; Editing by Paul Simao
