* C$ weakens to C$0.9526 to the U.S. dollar, or $1.0498
* C$ dragged by falling commodities, proximity to U.S.
* Conservative majority win supportive of CAD vs crosses
* Bonds edge higher, outperform Treasuries
TORONTO, May 3 (Reuters) - Canada's dollar slipped against
the safe-haven greenback on Tuesday as a sell-off in riskier
assets including equities and commodities halted an overnight
rally triggered by the crushing victory of Canada's
Conservatives in Monday's federal election.
Some commodity prices suffered their biggest one-day loss
in two weeks on Tuesday -- pulling resource-related currencies
such as the Canadian dollar down against the U.S. dollar -- on
fears that the huge price gains of the past month had made
everything from oil to silver too costly.
"Today it's largely about commodity price movements," said
Mark Chandler, head of fixed income and currency strategy at
RBC Capital Markets.
"It has little do with politics. It is due to the proximity
with the U.S. and once again the Canadian dollar is tied more
forcefully to the U.S. dollar compared to some of the overseas
currencies," he added. Chandler noted that Canada's currency
had risen the least against the greenback of any of the majors
over the last month.
The election outcome helped the Canadian dollar catch up
with other commodity-linked currencies but its rally against
the U.S. dollar was short-lived.
It rose to near 3-1/2 year highs overnight, hitting
C$0.9460, or $1.0571, after the Conservatives finally secured
the majority government they have sought since coming to power
in 2006. [ID:nN03253899]
ended the North American session at
C$0.9526 to the U.S. dollar, or $1.0498, down from Monday's
finish of C$0.9508 to the U.S. dollar, or $1.0517.
"It's positive that Canada now has an outright majority
government," said Adam Cole, global head of FX strategy at RBC
"The general trend during the campaign was of CAD
underperformance ... which was driven by the uncertainty
surrounding the surging support for the New Democratic Party.
What we should see now is that trade unwinding."
With election uncertainty out of the way, employment data
on Friday, which is expected to show a gain of 22,500 jobs,
will be the next key driver for the Canadian dollar.
CANADIAN BONDS OUTPERFORM
Canadian bond prices rose against the risk aversion
backdrop, while the Conservatives' election win gave them the
extra little boost to outperform U.S. Treasuries. [US/]
RBC's Chandler said that there should be few surprises when
the Conservatives bring down their budget and that in the
medium term, over two to three years, they should be in a
position to fulfill all the contingent promises that they laid
out in the campaign.
The two-year bond
was up 1 Canadian cent to
yield 1.698 percent, while the 10-year bond added
35 Canadian cents to yield 3.162 percent.
The yield on the 10-year bond widened to around 10 basis
points below its U.S. counterpart, compared with 7.5 basis
points on Monday.
(Additional reporting by Solarina Ho; editing by Peter