Market watchers will closely watch Bernanke's speech in Jackson Hole, Wyoming for any hints on when the Fed may introduce more monetary easing. The Fed's next policy meeting is set for Sept. 12-13.
Recent comments from Federal Reserve officials and policy meeting minutes showed that a good portion of the Fed committee is ready to move forward with a third round of quantitative easing -- producing new money to buy financial assets.
"Traders are managing sentiment that almost what's good for the US is even better for Canada from an economic standpoint. The fact that there's some positive US sentiment is definitely bolstering the Canadian dollar as a result," said Mark Frey, chief market strategist at Cambridge Mercantile Group.
The United States is the largest market for Canadian exports, so any moves to boost growth there would typically support the Canadian dollar.
Frey noted the market was positioning itself for positive discussion on quantitative easing on Friday and pricing in a much higher probability action will be taken before the US election in November.
"I don't think we're going to see something in October, weeks before the election. I think if we're going to see something, it's going to have to be at the next meeting in September," he said.
The Canadian dollar finished the session at C$0.9878 against the US dollar, or $1.0124, firmer than Monday's North American session close at C$0.9908, or $1.0093.
Earlier in the session, the currency touched C$0.9843, or $1.0160, matching the 3-1/2 month high hit last week.
Also in focus on Friday will be Canadian gross domestic product figures, which are expected to be soft.
Against other currencies, the Canadian dollar hit a 2-1/2-month peak against the Australian dollar.
Canadian bond prices were mixed, with the two-year bond down 2 Canadian cents to yield 1.167 percent and the benchmark 10-year bond up 7 Canadian cents to yield 1.799 percent.