When the Bank of Canada (or any other central bank) raises interest rates, it is essentially offering lenders (like banks) a higher return on investment.
High-interest rates are attractive to currency investors. Because they can earn interest on the currency that they have bought. So when a central bank raises interest rates investors to flock to buy their currency, which raises the value of that currency and, in turn, boosts the economy.
A strong economy usually leads to a strong currency, while a floundering economy will result in a fall in value. This is why GDP, employment levels and other economic indicators are monitored so closely by currency traders.