* Canadian dollar at C$1.2856, or 77.78 U.S. cents
* Price of oil rises 3 percent
* Bond prices lower across steeper yield curve
* 10-year yield touches highest since Feb. 8 at 2.405 percent
By Fergal Smith
TORONTO, May 9 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Wednesday, rebounding from a nearly seven-week low the day before, as a jump in oil prices countered uncertain prospects for talks on revamping the NAFTA trade pact.
At 4 p.m. (2000 GMT), the Canadian dollar CAD=D4 was trading 0.8 percent higher at C$1.2856 to the greenback, or 77.78 U.S. cents.
The currency traded in a range of C$1.2826 to C$1.2975. On Tuesday, it touched its weakest level since March 21 at C$1.2998.
"There is still NAFTA uncertainty lingering, but the higher oil prices are helping the Canadian dollar," said Eric Viloria, a currency strategist at Wells Fargo (NYSE:WFC).
U.S. crude oil futures CLc1 settled 3 percent higher after a bigger-than-expected drawdown in U.S. oil inventories extended gains from the U.S. decision to quit a nuclear deal with Iran. is one of Canada's major exports.
Mexico has launched a counterproposal to U.S. demands to toughen automotive industry content rules under the North American Free Trade Agreement, officials said on Tuesday, as ministers again pushed for a deal to rework the 24-year-old accord. sends 75 percent of its exports to the United States. Its economy could benefit if a deal to revamp NAFTA is reached.
The value of Canadian building permits rose 3.1 percent in March, more than economists' forecasts for a gain of 2.0 percent, on increased plans to build apartment buildings in the provinces of Quebec and British Columbia, data from Statistics Canada showed. government bond prices were lower across a steeper yield curve as the yield on the benchmark U.S. government note rose back above the psychologically significant level of 3 percent. 10-year bond CA10YT=RR declined 33 Canadian cents to yield 2.391 percent. The yield touched its highest intraday level since Feb. 8 at 2.405 percent.
Canada's jobs report for April is due on Friday.