Oct. 5 (Bloomberg) -- Canada’s dollar strengthened for a second day against its U.S. counterpart amid gains in stocks and commodities as investors sought higher-yielding assets tied to global economic growth.

The Canadian currency gained after last week’s 1 percent advance as crude oil, the nation’s largest export, rose as high as $71 a barrel. The Reuters/Jeffries CRB Index, a gauge of 19 raw materials, rallied 1.3 percent, its first advance in three days. Raw materials including crude account for more than half of Canada’s export revenue.

The currency, nicknamed the loonie for the aquatic bird on the C$1 coin, strengthened 0.8 percent to C$1.0711 per U.S. dollar at 4:45 p.m. in Toronto, from C$1.0797 on Oct. 2. One Canadian dollar purchases 93.36 U.S. cents.

“Risk is back on today,” said Tyson Wright, a Victoria, British Columbia-based senior currency trader at Custom House, which handles about C$200 million ($187 million) a day in foreign-exchange transactions. “The dollar just can’t hold on to sustained gains against the loonie because the outlook is still fairly rosy in terms of commodity prices.”

Canada’s dollar registered the best performance last week against its U.S. counterpart among the 16 most-traded currencies tracked by Bloomberg as the International Monetary Fund raised its growth forecast for Canada’s economy. The greenback declined 13 percent against the loonie in the past six months.

Service Businesses

The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which make up almost 90 percent of the economy of Canada’s biggest trade partner, showed expansion in September for the first time in a year. The Tempe, Arizona-based group said today the measure rose to 50.9, higher than forecast, from 48.4 in August. Fifty is the dividing line between expansion and contraction.

Over the past several months, the loonie has tended to strengthen on positive U.S. economic data as investors left the safety of the greenback for commodity-linked currencies that traditionally benefit when global growth rebounds.

“In this period of continued uncertainty, the commodity- based currencies benefit more from U.S. data,” said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of the nation’s biggest bank.

The dollars of New Zealand and Australia, which like the loonie tend to rise and fall with stocks and commodity prices, were the No. 1 and 3 performers, respectively, against the U.S. dollar today among the most-traded currencies. The kiwi strengthened 2 percent and the Aussie rose 1.4 percent. South Africa’s rand was No. 2.

Oil, Stocks

Crude oil for November delivery rose 0.5 percent, to $70.33 a barrel, on the New York Mercantile Exchange. It climbed as much as 1.5 percent to $71.

The Standard & Poor’s 500 Index gained 1.5 percent, and the MSCI World Index, a measure of stocks in 23 developed markets, advanced 1 percent.

The loonie earlier gained as Group of Seven finance officials refrained from calling for measures to stem the slide in the greenback after a meeting in Istanbul on Oct. 3 and reiterated that “excessive volatility and disorderly movements” in exchange rates threaten economic growth. The statement came at the end of a week in which global policy makers said a falling dollar risks impeding their recoveries from the recession.

The statement “is not going to do much but encourage U.S. dollar sellers, as it seems that they do not believe that the U.S. dollar’s weakness is at a ‘tipping point,’” Jonathan Gencher, Toronto-based director of foreign-exchange sales at BMO Capital, wrote today in a note to clients.

Canadian government bonds rose, pushing the yield on the benchmark 10-year note down two basis points, or 0.02 percentage point, to 3.24 percent. The price of the 3.75 percent security maturing in June 2019 increased 19 cents to C$104.21.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net.

Last Updated: October 5, 2009 16:47 EDT