Canadian dollar gains 0.2% against the greenback Canada's annual inflation rate accelerates to 3.7% in July Price of U.S. oil increases 0.8% Canadian bond yields rise across a steeper curve TORONTO, Aug 18 - The Canadian dollar strengthened against its U.S. counterpart on Wednesday as oil prices rose and domestic data showed inflation climbing at the hottest pace since 2011, with the currency recovering from a near four week low the day before. Canada's annual inflation rate in July accelerated to 3.7%, up from 3.1% in June due to both the base-year effect and higher shelter costs. Analysts expected inflation to rise to 3.4%. The Bank of Canada says that the factors pushing up inflation are uncertain, but their persistence and magnitude are transitory and will be monitored closely. The price of oil, one of Canada's major exports, rose after four days of declines. Investors have worried about the outlook for fuel demand as the use of rail, air and other forms of transport is constrained by rising COVID - 19 cases globally. U.S. crude oil futures rose 0.8% to $67.11 a barrel, while the Canadian dollar was trading 0.2% higher at 1.2604 to the greenback or 79.34 lower in the dollar-to-dollar ratio. On Tuesday it touched its weakest level since July 21 at 1.2648. The focus on Wednesday will also be on the minutes of the Federal Reserve's final policy meeting. Analysts expect the Fed to announce its plan for a taper of its asset purchases as early as its Sept. 21 -- 22 meeting. Canadian government bond yields were higher across a steeper curve. The 10 year long rose to 1.166%, after touching its lowest intraday amount in nearly two weeks at 1.120% on Tuesday.