* C$ hits 7-month high overnight, then pares gains
* Bonds lower, market awaits supply
TORONTO, May 21 (Reuters) - The Canadian dollar fell versus the U.S. currency on Thursday as renewed risk aversion and lower oil prices knocked it from the seven-month high it reached overnight.
The currency touched its highest level since Oct. 1 early on Thursday, extending gains made on Wednesday on rising oil and equity prices and as the U.S. dollar tumbled on hope the global economy may be stabilizing, which dented the greenback’s safe haven appeal.
But the U.S. dollar then recovered from its lowest level of the year against a basket of currencies as ratings agency Standard & Poor’s cut its UK ratings outlook to negative from stable. [FRX/]
At 9:30 a.m. (1330 GMT), the Canadian dollar CAD=D3 was at C$1.1468 to the U.S. dollar, or 87.20 U.S. cents, down from C$1.1404, or 87.69 U.S. cents, at Wednesday's close.
Early on Thursday it rose as high as C$1.1347 to the U.S. dollar, or 88.13 U.S. cents, a seven-month high.
“The Canadian dollar was right up there as one of the biggest gainers yesterday and it’s really only about middle of the pack in terms of the decline today,” said Eric Lascelles, chief economics and rates strategist at TD Securities.
“To me it suggests not so much a Canada-specific story but one in which Canada is part of a larger cluster of currencies trading off the risk aversion story.”
Also giving a negative tone to the Canadian dollar was data that showed wholesale trade in Canada slipped by 0.6 percent in March from February, the seventh fall in the last eight months. [ID:nN21260167]
Adding pressure was slipping oil prices, which fell below $61 a barrel after hitting a six-month high in the previous session on expectations of a rebound in the world economy. [ID:nSIN101873]
Canadian bonds eased across the curve on Thursday, contrary to a rise in the U.S. Treasuries.
“Canada has been very stable...and has been quite resistant to U.S. moves,” said Lascelles, adding that part of the drag on Thursday arose from supply concerns.
The benchmark two-year government bond slipped 2 Canadian cents to C$100.27 to yield 1.115 percent, while the 10-year bond fell 22 Canadian cents to C$104.98 to yield 3.166 percent.
The 30-year bond lost 20 Canadian cents to C$118.50 to yield 3.908 percent. The U.S. 30-year yield was 4.111. (Reporting by Ka Yan Ng; editing by Peter Galloway)
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