(Adds investor quotes and details throughout; updates prices)
* Canadian dollar rises 0.5% against the greenback
* Loonie touches its lowest level since Aug. 17 at 1.3259
* Price of U.S. oil increases 2.2%
* Canadian bond yields trade mixed across a steeper curve
By Fergal Smith
TORONTO, Sept 9 (Reuters) - The Canadian dollar rose against the greenback on Wednesday as oil prices rallied and the Bank of Canada maintained a pledge to support the economy as it moves into a recuperation phase, with the loonie rebounding from an earlier three-week low.
The Canadian dollar CAD= was trading 0.5% higher at 1.3164 to the greenback, or 75.96 U.S. cents. The currency hit its weakest intraday level since Aug. 17 at 1.3259.
The Bank of Canada held its key overnight interest rate steady at 0.25%, as expected, and said the bounce-back in economic activity in the third quarter looks to be faster than previously anticipated. the economy will continue to require extraordinary monetary policy support as it moves from a reopening phase to recuperation, the central bank said.
"All the low-hanging fruit has basically been harvested and now it's virus dependent and a slow grind," said Darcy Briggs, a portfolio manager at Franklin Templeton Canada.
The price of oil, one of Canada's major exports, clawed back some of the losses it sustained in the previous session, but a rebound in COVID-19 cases in some countries undermined hopes for a steady recovery in global demand. crude CLc1 prices were up 2.2% at $37.56 a barrel, while Wall Street bounced as a rout in technology shares halted and investors shrugged off news that AstraZeneca had paused global trials of its experimental coronavirus vaccine. housing starts rose 6.9% in August compared with the previous month to a seasonally adjusted annualized rate of 262,396 units, adding to evidence of economic recovery. Economists had expected starts to fall to 220,000. government bond yields were mixed across a steeper curve in sympathy with U.S. Treasuries. The 10-year CA10YT=RR climbed 1.6 basis points to 0.582%.