TORONTO: The Canadian dollar on Friday rose to its highest level in more than two months against the greenback as data showed Canada regaining all the jobs it lost since the start of the pandemic, supporting further cuts to Bank of Canada bond purchases.

The Canadian economy posted a monster gain of 157,100 jobs in September, almost three times the number expected, and the unemployment rate hit an 18-month low of 6.9%, Statistics Canada data indicated.

"While the headline print likely seals the deal for another taper from the Bank of Canada later this month, there's still a ways to go to fully heal the labour market," said Royce Mendes, a senior economist at CIBC Capital Markets.

"There was still slack to be absorbed given that the population has increased since early 2020."

The Bank of Canada is due to make an interest rate decision and update its economic projections on Oct. 27.

Canadian dollar firms as risk appetite rebounds

The Canadian dollar was trading 0.5% higher at 1.2491 to the greenback, or 80.06 US cents, after touching its strongest since Aug. 5 at 1.2488. The currency was on track to rise for a third week, with a gain of 1.2%

Gains for the loonie came as the US dollar fell against a basket of major currencies. US data showed that employment increased far less than expected in September amid a decline in government payrolls.

The price of oil, one of Canada's major exports, was buoyed by a global energy crunch that has helped gas prices to record highs and prompted China to demand increased coal production. US crude prices were up 1.6% at $79.58 a barrel.

Canadian government bond yields were higher across the curve. The 10-year touched its highest since May 13 at 1.601% before dipping to 1.584%, up 1.6 basis points on the day.