The Canadian dollar gained more than three-quarters of a cent on Tuesday, rising to its highest level since last summer in part because of higher oil prices.

The loonie closed the trading day at 78.99 cents US according to the Bank of Canada, just below the 79 cent benchmark it seesawed above and below all day long.

"The [loonie] rally looks poised to extend," Scotiabank's currency strategists, Eric Theoret and Shaun Osborne, said in a note to clients. "Crude oil volatility is certainly a factor in the recent swings [so] If the … rally is to extend, crude and commodities will have to help."

At that level, the loonie is now three cents higher than the Bank of Canada assumed it would be for most of this quarter in its most recent Monetary Policy Report, which was released just last week.

Small rebounds in commodity prices are driving the dollar's recent surge, as the price for a barrel of oil was up $1.27 US to close at $42.46 on Tuesday.

Despite the failure for OPEC and other oil-producing nations to strike a deal last weekend to curb output, oil is surging at least in the short run because of a strike in Kuwait that stretched into its third day on Tuesday.

That knocked off about 1.5 million barrels worth of daily production out of the system, and pushed up crude prices as a result.

"The Kuwaiti strike is supporting prices," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

Brent crude, the international benchmark, fared even better than WTI did as it rose 82 cents US to $43.59 a barrel in London.

The TSX was up too, closing 147 points higher at 13,867. At that level, the TSX is now 20 per cent above the lows it hit in January, which is the general definition of a bull market.

Despite the run-up, economist Doug Porter at the Bank of Montreal said there's more room for the loonie to grow. "The commodity currencies have snapped back as risk appetite has returned, and as the US dollar itself has faded," Porter said. "This is not a primarily Canadian story."