CANADA FX DEBT-C$ hits 2-week low as oil, silver dive
* C$ ends down at C$0.9585 vs US$, or $1.0433
* Bond prices track Treasuries higher
* Canada 10-year bond auction sees solid demand (Updates to close, adds details, comments)
By Claire Sibonney
TORONTO, May 4 (Reuters) - Canada's commodity-linked dollar fell to a two-week low against the U.S. dollar on Wednesday, driven down by a slide in prices for oil and other resources as investors feared some markets were overbought.
The broad sell-off in commodities dragged equities sharply lower as investor appetite for risk-taking shriveled due to concerns about a slowdown in the Chinese economy as well as disappointing U.S. economic data. [MKTS/GLOB]
U.S. oil prices were also hit by inventory data showing a larger-than-forecast increase in crude stockpiles, and slipped below $109 a barrel. Silver had its third day of heavy losses. [O/R] [GOL/]
"We've seen a fairly significant slide in silver prices, which perhaps may be consistent with investors starting to unwind some of those sort of commodity-based positions," said Jeremy Stretch, head of FX strategy at CIBC World Markets.
The Canadian dollar's status as a North American play did not help its performance as signs of weakness in the U.S. economic recovery mounted. Reports on Wednesday showed a sharp slowdown in the vast services sector in April and less hiring by private companies. [ID:nN04209762]
The weak U.S. data helped push up safe-haven U.S. Treasuries, and Canadian government bonds with them, but weighed on the greenback, which sank to three-year lows aganst a basket of currencies. [US/] [FRX/]
More key economic data -- April employment reports from the United States and Canada -- will be released on Friday.
The results of the Canadian general election on Monday, which gave the business-friendly Conservatives a stable majority government, initially pushed the Canadian dollar to a near 3-1/2 year high. But so so far the election has had little lasting impact on the market despite expectations it would allow the Canadian dollar to catch up with gains made recently by other commodity-supported currencies.
"People were hoping for a catch-up based on the election. That hasn't materialized, I believe it will in the near future," said John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm.
The Canadian dollar CAD=D4 ended the North American session at C$0.9585 to the U.S. dollar, or $1.0433, down from C$0.9526 to the U.S. dollar, or $1.0498, at Tuesday's close.
It touched its lowest level since April 19 during the day.
After breaking through the 21-day moving average earlier in the session, analysts said the next major support level for the Canadian dollar is the 50-day moving average, around C$0.9675.
10-YEAR AUCTION MET BY HUNGRY INVESTORS
Canada's sale of 10-year government bonds met with healthy appetite on Wednesday, helped by doubts about global growth and investor confidence after the Conservatives won the first majority government in almost seven years. [ID:nN04209510]
"That's all despite the fact that the 10-year sector is not exactly cheap," said Fergal Smith, managing market strategist at Action Economics, noting that yields that far out the curve trade well below their U.S. counterparts.
The two-year bond CA2YT=RR was up 3 Canadian cents to yield 1.684 percent, while the 10-year bond CA10YT=RR rallied 35 Canadian cents to yield 3.114 percent. (Editing by Peter Galloway)
© Thomson Reuters 2017 All rights reserved.