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A Canadian dollar coin, commonly known as the "loonie," is pictured in this illustration picture taken in Toronto on Jan. 23, 2015.Mark Blinch/Reuters

These are relatively wild times for the Canadian dollar.

Over the past few days, the loonie has spiked on a rally in oil prices and a stronger economic outlook, pushing on Friday back to almost 83-cents U.S.

It then dipped back after this "dramatic run" after a period of illiquidity, said senior currency strategist Greg Moore of RBC Dominion Securities.

Those who'd been holding back from the market decided to return and consider the picture from the last few days, and speculating that the run-up may have been overdone.

The currency touched as low as 81.50 cents and as high as 82.71 cents on Friday, meaning a swing of more than a penny.

A combination of the oil price rally and a brighter outlook from the Bank of Canada had driven the Canadian dollar sharply higher.

Also playing into the market were fresh readings that showed higher-than-expected inflation in Canada and a rebound in retail sales.

"Given the combination of the 38-per-cent rally in WTI oil prices and the BoC's sudden more optimistic shift and the broader weakening in the USD, we see the CAD rally as fully justified," said chief currency strategist Camilla Sutton of Bank of Nova Scotia, referring to the U.S. and Canadian currencies by their symbols, and to West Texas Intermediate, the American crude benchmark.

"The fundamental picture has shifted and the currency has reacted," she said.

Among other things, this followed the Bank of Canada's monetary policy report and comments from Governor Stephen Poloz earlier in the week.

All in all, the economic picture has brightened in Canada as the central bank sees the hit from the oil shock as "front-loaded," meaning things should get better from here on out.

"The Canadian dollar just reeled off its best weekly gain in four years, popping 3 per cent from last Friday's close," said chief economist Douglas Porter of BMO Nesbitt Burns.

"The currency's impressive move was stoked by four separate (albeit somewhat related) factors that seemingly came together in a one-week blizzard of helpful news for the previously beleaguered bird," he added in a report Friday.

"The challenge is to sort out whether these factors are temporary, or whether the currency has made a semi-permanent turn for the good."

Mr. Porter's four points include the oil rally, the "less dovish" Bank of Canada, the weaker U.S. dollar and the firmer Canadian economic indicators.

So what comes next?

"Some of the past week's changes could persist for some time, prompting us (and the market) to shift its near-term view on the Canadian dollar, although we haven't made a significant change on the view further out into 2016," Mr. Porter said.

"The biggest wild card remains oil; if its recent rally is for real, and builds further momentum, the Canadian dollar outlook will move in lockstep. Recall as a rough guide that every $10 move in oil tends to lead to a similar three- to five-cent move in the loonie."

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