May 30 (Bloomberg) -- Canada’s currency rose the most in a month since the Korean War as investors stepped out of the haven of the U.S. dollar in search of assets with higher returns.

“Traders and speculators continue to push, and the U.S. dollar is so receptive to weakness that it’s an easy case to make,” said Eric Lascelles, Toronto-based chief economics and rates strategist at TD Securities Inc. “It’s the risk-appetite story right now that’s dominant.”

The Canadian currency, known as the loonie for the aquatic bird on the one-dollar coin, rose 9.3 percent this month, the most since at least October 1950, according to data from the Bank of Canada and Bloomberg. Stocks advanced and commodities rallied, led by energy, as the slumping greenback boosted demand for raw materials as a hedge against inflation. Raw materials account for more than half of Canada’s export revenue.

The loonie appreciated to C$1.0915 per U.S. dollar in Toronto yesterday, from C$1.1925 on April 30. It touched the strongest level yesterday since Oct. 6, C$1.0892. One Canadian dollar buys 91.61 U.S. cents.

In 1950, Canada sent three warships to join the United Nations effort in the Korean conflict, construction got under way on the Trans-Canada Highway and the nation’s population was 13.7 million, about 40 percent of today’s count of 33.7 million.

Canada’s dollar was fixed to the U.S. currency from the founding of the Bank of Canada in 1934 until after World War II, according to the central bank’s Web site. It was allowed to float from 1950 until 1962, and then again from June 1970.

Oil, Stocks

There are “a lot of reasons” for the loonie’s rise this month, including “oil, commodities, local markets generally bid,” said Dustin Reid, director of currency strategy in Chicago at RBS Securities Inc. “But the real issue appears to be longer-term concern over the value of the U.S. dollar.”

Crude oil, the largest component in the Bank of Canada’s commodity price index, climbed 30 percent in May. Oil for delivery in July touched $66.63 a barrel yesterday, the highest since November. The Reuters/Jefferies CRB Index of 19 raw materials strengthened 14 percent this month.

The MSCI World Index, a measure of stocks in 23 developed countries, rose 9.5 percent. The U.S. currency weakened to $1.41 against the euro for the first time this year and was the worst performer in May among the major currencies tracked by Bloomberg.

The loonie dropped a record 18 percent last year on plummeting prices for commodities. Since reaching a four-year low on March 9, the currency climbed 19 percent on optimism that the worst of the global economic crisis might be over.

Haven Bid ‘No Longer’

“It adds up to no longer wanting safe haven and no longer an underlying bid for U.S. dollars,” said David Watt, a senior currency strategist in Toronto at RBC Capital Markets. “If only I was more convinced about the stability of the underlying fundamentals.”

The dollars of New Zealand and Australia, which like Canada’s tend to trade in tandem with stocks and commodity prices, added 13 percent and 10 percent respectively this month against the greenback as prospects for global growth improved.

Canadian government bonds lost investors 1.5 percent this month as investors sought higher returns, according to a Merrill Lynch & Co. index. The yield on the 10-year bond rose 28 basis points, or 0.28 percentage point, to 3.38 percent, from 3.1 percent on April 30. The price of the 3.75 percent security due in June 2019 fell C$2.68 to C$103.08.

Canada’s dollar will weaken to C$1.19 by the end of this year, according to the median forecast of 42 economists and analysts surveyed by Bloomberg News.

‘Too Much Fervor’

“Players that are coming late to the game are going to have to be careful,” said John Curran, a Toronto-based senior vice president at CanadianForex Ltd., an online foreign-exchange dealing firm. “There seems to be too much fervor in this selling.”

TD Securities, a unit of Canada’s second-largest bank, predicted this week the loonie would reach parity with its U.S. counterpart by the end of the year. Canada’s dollar reached par with the “Big Dollar” for the first time in three decades in September 2007 following a 60 percent climb over five years on the back of booming commodity prices.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

Last Updated: May 30, 2009 08:00 EDT