Nov. 2 (Bloomberg) -- Canada’s dollar advanced from the lowest level in a month against its U.S. counterpart after commodities including crude oil gained, making currencies tied to growth more attractive.

“There is a little bit of risk appetite creeping back in,” said Jonathan Gencher, a Toronto-based director of foreign- exchange sales at BMO Capital, a unit of Canada’s fourth-largest bank.

The loonie trimmed gains as U.S. stocks fluctuated after a Federal Reserve official said the nation’s banking system is still “far from robust.” The comments by Jon Greenlee, of the Fed unit that regulates banks, in testimony to a congressional panel tempered a rally spurred by better-than-forecast data on manufacturing and home sales.

The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 0.7 percent to C$1.0767 per U.S. dollar at 5 p.m. in Toronto, from C$1.0848 on Oct. 30. One Canadian dollar purchases 92.80 U.S. cents. The currency advanced as much as 1.2 percent to C$1.0715 after earlier touching C$1.0870, the weakest level since Oct. 2.

Traders are buying back the Canadian dollar to cover bets, according to John Curran, a Toronto-based senior vice president at CanadianForex Ltd. “These are decent levels to take off some of the recent long U.S. dollar positions.” A long position is a wager a currency will rise.

U.S. Manufacturing

The loonie touched the highs of the day after a report showed manufacturing in the U.S. expanded last month at the fastest pace in more than three years. The Institute for Supply Management’s factory index rose to 55.7, the highest level since April 2006, from 52.6 in September. A report from the National Association of Realtors showed home resales in the U.S. rose in September for an eighth straight month.

The Canadian dollar advanced against all of the 16 most- traded currencies tracked by Bloomberg. The greenback fell versus eight of the 16.

The Canadian currency, which gained 19 percent this year to Oct. 19, dropped 4.5 percent since then as officials including Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty warned that a stronger exchange rate versus the U.S. dollar jeopardizes the nation’s recovery. The currency also weakened as investors speculated that rallies in global stocks and commodities may be overdone.

Oil, Gold

Crude oil for December delivery rose 1.5 percent to $78.14 a barrel in electronic trading on the New York Mercantile Exchange. Crude, the nation’s biggest export, gained 75 percent this year. Canada is the biggest supplier of energy products to the U.S., its largest trading partner, according to the Energy Information Administration.

Gold futures for December delivery jumped 1.9 percent to $1,059.80 an ounce on the New York Mercantile Exchange’s Comex division, the highest closing price since Oct. 23.

The Standard & Poor’s 500 Index rose 0.7 percent at closing after rising as much as 1.5 percent and falling as much as 0.7 percent.

Canadian employers added 10,000 jobs last month, compared with a gain of more than 30,000 in September, and the unemployment rate probably rose to 8.5 percent, from 8.4 percent, according to the median estimates in Bloomberg surveys of economists. Statistics Canada is due to release the data at 7 a.m. in Ottawa on Nov. 6.

Monetary-policy decisions this week by the Federal Reserve, European Central Bank and Bank of England may also move markets.

“There’s a tremendous amount of event risk on the table this week,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto.

‘Jittery Markets’

The Federal Open Market Committee will probably say on Nov. 4 that it will keep the benchmark interest rate unchanged at zero to 0.25 percent, according to all 95 economists in a Bloomberg survey.

The prospect of the decision “will make the market jittery ahead of a possible change in tone from the Fed,” said Philippe Denolf, a currency trader in Montreal at Laurentian Bank of Canada. Along with uncertainty about both the stock rally and economic data, “all of these elements should temper Canadian- dollar appreciation for the time being,” he said.

The European Central Bank and the Bank of England will leave their benchmark interest rates at record lows of 1 percent and 0.5 percent respectively the next day, economists forecast.

Canada’s government bonds fell, with the 10-year note’s yield climbing two basis points, or 0.02 percentage point, to 3.44 percent. The price of the 3.75 percent security maturing in June 2019 decreased 16 cents to C$102.51.

The 10-year’s yield will rise to 4.2 percent by the end of 2010, according to the weighted average of 12 forecasts by economists in a Bloomberg News survey.

Canada will auction C$3.5 billion ($3.3 billion) of 10-year bonds on Nov. 5, the Bank of Canada said last week. The 3.5 percent securities mature in June 2020.

The nation’s bonds have lost investors 1.1 percent this year, according to a Merrill Lynch index.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net

Last Updated: November 2, 2009 17:20 EST