* C$ hits low of C$0.9705 vs US$, or $1.0304,
* Oil prices tumble on demand fears
* US jobless claims surge to 8-month high
* Bond prices extend gains in flight to safety (Updates after U.S. data)
By Claire Sibonney
TORONTO, May 5 (Reuters) - The Canadian dollar dropped to its lowest level in more than two weeks against the U.S. dollar on Thursday morning, extending its recent slide on sharply lower prices for oil and other commodities and a surge in U.S. jobless claims.
Data early in the day showed the number of Americans filing for unemployment benefits rose to an eight-month high last week. [ID:nN05259672]
The currency was also undermined by the European Central Bank's decision to leave interest rates unchanged and by signals from ECB President Jean-Claude Trichet that rates are also unlikely to be raised next month. [O/R] [ID:nLDE7440GG]
The uncertainty over rates hit the euro hard and help drag the Canadian dollar and other risk-related currencies lower against the safe-haven greenback and yen, said C.J. Gavsie, managing director of foreign exchange sales at BMO Capital Markets.
"I think that this Canadian-dollar bull trend had continued on for so much time that I'm not surprised to see a little bit of a pullback here," he said.
Gavsie said, however, that the current commodity pullback may be temporary. "I think that in the grand scheme of things, commodity prices, despite being off from their highs, are still showing signs of holding in there."
Accrding to a Reuters poll of foreign exchange strategists released on Thursday the Canadian dollar CAD=D4 is set for a gradual and modest descent over the next 12 months. But the median forecast was that the currency will stay well above parity with the greenback. [CAD/POLL]
At 11:33 a.m. (1533 GMT), the Canadian dollar CAD=D4 was at C$0.9678 to the U.S. dollar, or $1.0333, down from Wednesday's North American finish of C$0.9585 to the U.S. dollar, or $1.0433. Earlier it fell as low as C$0.9705 to the U.S. dollar, or $1.0304, its weakest point since April 18,
Gavsie said that after it broke through the 50-day moving average, the next support level for the Canadian dollar is the April 18 low of C$0.9722.
Minor Canadian economic indicators showing an unexpected spike in March building permits and drop in the April Ivey Purchasing Managers Index on Thursday were mostly overshadowed by the broad exit from riskier assets. [ID:nN0796933] [ID:nN05299131]
Market focus is on April employment reports from the United States and Canada.
Canadian government bond prices extended gains on Thursday, tracking U.S. Treasuries higher in a flight to safe-haven assets. [US/]
The two-year bond CA2YT=RR was up 6 Canadian cents to yield 1.655 percent, while the 10-year bond CA10YT=RR rallied 30 Canadian cents to yield 3.180 percent.
(Editing by Peter Galloway)