(Adds strategist quotes and details throughout, updates prices) * Canadian dollar strengthens 0.4% against the greenback * Teranet data shows home prices rising 2.7% in June from May * Price of U.S. oil settles 1.5% higher * Canadian 10-year yield rises 1.7 basis points to 1.164%, By Fergal Smith TORONTO, July 20 (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Tuesday as oil and U.S. equity markets rallied, with the currency recovering from a five-month low the day before. The spread of the Delta coronavirus variant has rattled investors in recent days, raising worries that the global economic recovery could stall. But economically sensitive stocks and oil, one of Canada"s major exports, staged a comeback on Tuesday, with market participants taking advantage of a two-month low for crude hit in the previous session. "The stars really aligned for the loonie late in today"s session, as oil prices bounced back, equities rallied strongly and U.S. yields stayed in check," said Erik Nelson, a currency strategist at Wells Fargo. "All that helped contribute to a recovery in the Canadian dollar." U.S. crude oil futures settled 1.5% higher at $67.42 a barrel, while the Canadian dollar strengthened 0.4% to 1.2698 per greenback, or 78.75 U.S. cents. On Monday, the currency touched its weakest level since Feb. 5 at 1.2807, while it has declined 5.5% since notching in June a six-year high near 1.20. In domestic data, the Teranet-National Bank Composite House Price Index rose 2.7% in June from May, with the pace of annual gains accelerating to a record level of 16%. The Canadian retail sales report for May is due on Friday, which could guide expectations for the Bank of Canada policy outlook. Last week, the central bank took a mostly optimistic stance on the country"s economy, saying the threat of the COVID-19 pandemic had largely passed, while warning inflation would remain hot in the near term. Canadian government bond yields were mixed across a steeper curve in sympathy with U.S. Treasuries. The 10-year rose 1.7 basis points to 1.164%, after touching on Monday its lowest intraday level in five months at 1.097%. (Reporting by Fergal Smith; Editing by Barbara Lewis and Peter Cooney)