Investing.com -- The Canadian dollar strengthened to a more than one-week high against the U.S. dollar on Thursday, extending its rebound after the Bank of Canada kept interest rates unchanged but warned that inflation risks were intensifying.

The loonie was last up 0.20% at C$1.3817 per U.S. dollar, according to live Investing.com data, after opening at 1.3844. It has traded between 1.3813 and 1.3848 so far. That translates to roughly 72.37 U.S. cents.

The move extends a rebound from Tuesday, when the Canadian dollar fell to 1.3939 per U.S. dollar, its weakest level since Aug. 13. The currency rose 0.4% on Wednesday after the BoC held its policy rate at 2.25% for a seventh consecutive meeting.

The central bank's decision was widely expected, but Governor Tiff Macklem's emphasis on upside inflation risks encouraged investors to increase bets that borrowing costs could eventually rise. The BoC has also flagged the impact of elevated energy prices and U.S. tariffs on Canada's inflation outlook.

Higher oil prices have provided additional support for the commodity-linked Canadian dollar. Meanwhile, markets are weighing the narrowing interest-rate gap between Canada and the United States and the prospect that trade tensions between Ottawa and Washington could eventually ease.

A Reuters poll published Thursday showed analysts expect the loonie to weaken modestly to 1.39 per U.S. dollar over three months, before strengthening to 1.36 in 12 months if U.S.-Canada trade tensions subside.

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