TORONTO - The loonie flirted with 78 cents US for the first time in nearly two months, but lost some of its strength after the release of economic data on both sides of the border.

The Canadian dollar climbed 0.38 of a cent to 77.80 cents U.S., closing at its highest level in more than a month in the wake of U.S. housing, inflation and manufacturing reports and better-than-expected Canadian manufacturing data.

The loonie has been gaining strength since July 26, and traded as high as 78.11 cents US on Tuesday morning shortly before the economic data was released at 8:30 a.m. ET. The loonie ended Monday at 77.42 cents US -- the highest close since July 14.

One investment manager warned Canada's currency is defying economic fundamentals. 

 “Some people have pointed out that the strength in the Canadian dollar is somewhat contrary to the underlying economic data we’re seeing in Canada which has really been fairly weak," said Colin Stewart, CEO and portfolio manager at JC Clark, in an interview with BNN.

"I think it’s a matter of, yes – fiscal stimulus, oil prices moving up, positive capital flows into the country – all with a backdrop of somewhat muted economic growth. I think that probably is a limiting factor that until we see a real pick up in the Canadian economy, there’s going to be an upward cap as far as how high that Canadian dollar can move.”

Stewart added that the loonie's rise may be a result of "a flight to safety" amid the backdrop of the U.S. election. 

“I think people see Canada as a stable political environment," he said. "People say, ‘Geez, it’s not so bad to own Canadian government bonds’ – particularly with the backdrop of the U.S. election.” 

The loonie's ascent is also raising concerns that it will make the country less competitive in manufacturing. 

“We are competing against a country like Mexico, where the currency has fallen 8.5 per cent over the last year. Labour costs are somewhere between a dollar and three dollars an hour," Karl Schamotta, director of foreign exchange research at Cambridge Global Payments, told BNN in an interview. 

"It’s going to be very, very hard for the Canadian economy at this currency level to compete and to make up market share, particularly in the auto manufacturing sector.” 

With files from BNN