At 4 p.m. EST (2100 GMT), the Canadian dollar <CAD=D4> was trading at C$1.2507 to the greenback, or 79.96 U.S. cents, up 0.6 percent from Friday's close. It traded between C$1.2500, its strongest level since Oct. 20, and C$1.2557 during the session.
The currency rose nearly 7 percent in 2017.
The loonie, as the Canadian currency is colloquially known, has gained steadily versus the greenback since mid-December as part of a broader U.S. dollar retreat, which one corporate trader said may be prompting Canadian exporters to trim their targets to the high C$1.20s from the low C$1.30s previously.
It's put "a significant seed of doubt in the minds of Canadian exporters," said Brad Schruder, director of corporate sales and structuring at BMO Capital Markets.
He said Friday's Canadian employment report for December will be a key piece of data to help the Bank of Canada decide whether to hike rates in January or to wait for later in the year. Bets are slightly in favor of a hold-steady decision.
The U.S. dollar <.DXY> retreated against a basket of major currencies as data showing a faster pace of euro zone manufacturing activity boosted the euro.
The price of oil, one of Canada's major exports, touched its highest intraday since mid-2015 amid large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russia, before settling slightly lower.
Still, speculators have cut bullish bets on the Canadian dollar to the lowest since July, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Dec. 26, net long positions had fallen to 17,346 contracts from 45,901 a week earlier.
Canadian government bond prices were lower across the yield curve, with the two-year <CA2YT=RR> down 3 Canadian cents to yield 1.703 percent and the benchmark 10-year <CA10YT=RR> falling 30 Canadian cents to yield 2.079 percent.
(Additional reporting by Fergal Smith; Editing by Bernadette Baum and Tom Brown)
By Alastair Sharp