(Adds strategist quotes and details throughout; updates prices)
* Canadian dollar falls 0.2% against the greenback
* Loonie touches its strongest level since Jan. 8 at 1.2994
* Price of U.S. oil settles 0.4% higher
* Canadian bond yields ease across much of a flatter curve
By Fergal Smith
TORONTO, Sept 1 (Reuters) - The Canadian dollar fell against its U.S. counterpart on Tuesday as the recent sell-off in the greenback lost some momentum, with the loonie retreating from its strongest level in nearly eight months despite domestic data that showed factory sector growth.
The loonie CAD= was trading 0.2% lower at 1.3071 to the greenback, or 76.51 U.S. cents. Earlier in the day, the currency, which climbed 2.8% in August, touched its strongest level since Jan. 8 at 1.2994.
"It seems consistent with the movement in the U.S. dollar generally," said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets. "We've seen other currencies do the same. That is, weaken a little bit after they hit key levels.
The euro EUR= turned lower against the U.S. dollar, pulling back after it broke through the $1.20 mark for the first time since 2018. Investors have been betting that a move by the Federal Reserve to a policy of average inflation targeting would lead to interest rates staying lower for longer. price of oil, one of Canada's major exports, rose as better-than-expected U.S. manufacturing activity data spurred hope for a post-pandemic economic recovery. U.S. crude oil futures CLc1 settled 0.4% higher at $42.76 a barrel. manufacturing activity accelerated in August to its fastest pace in two years, adding to evidence of a rapid rebound in the domestic economy as businesses reopen following coronavirus-related disruptions, data showed. clues as to the strength of economic recovery could come from Canada's jobs report for August, which is due on Friday.
Canadian government bond yields eased across much of a flatter curve on Tuesday, with the 10-year CA10YT=RR down 3.7 basis points at 0.587%. Last Friday, the 10-year yield touched its highest intraday level in nearly three months at 0.697%.