Investing.com - The U.S. dollar fell to three-week lows against its Canadian counterpart on Friday, as upbeat Canadian inflation data lent strong support to the country's currency, as well as higher oil prices.

Greenback drops against loonie after Canadian inflation report

USD/CAD

 hit 1.1206 during European afternoon trade, the pair's lowest since October 31; the pair subsequently consolidated at 1.1218, declining 0.74%.

The pair was likely to find support at 1.1177, the low of October 31 and resistance at 1.1326, the session high.

In a report, Statistics Canada said that consumer price inflation rose 0.1% last month, compared to expectations for a 0.3% fall, after a 0.1% uptick in September.

Canadian consumer prices rose at an annual rate of 2.4% in October, up from 2.0% the previous month. Analysts had expected the annual rate to remain unchanged at 2.0% last month.

Core consumer prices, which exclude the eight most volatile items, rose 0.3% in October, more than the expected 0.2% gain, after a 0.2% increase the previous month.

Core CPI rose at an annual rate of 2.3% last month, up from 2.1% in September and compared to expectations for an annual rate of 2.2%.

The report added to optimism over the strength of Canada's economy after data on Thursday showed that Canadian wholesale sales rose 1.8% in September, more than the expected 0.7% gain, after a flat reading in August.

The commodity-linked loonie was also boosted by a surge in oil prices, up 1.27% in European afternoon trading hours.

The loonie was sharply higher against the euro, with EUR/CADplummeting 1.77% to 1.3924.

The euro came under pressure after European Central Bank President Mario Draghi reiterated on Friday that the central bank is prepared to act rapidly if low inflation persists.

Draghi also warned about weak growth in the euro zone, saying that no improvements are expected in the coming months.

The ECB head was speaking at the 24th European Banking Congress "Reshaping Europe," in Frankfurt.