* C$ drops to 94.64 U.S. cents
* US consumer sentiment at 10-month low, home prices slip
* Oil, gold, base metal prices down
* Bonds extend gains after soft data
(Updates to close, adds details, quotes)
By Claire Sibonney
TORONTO, Feb 23 (Reuters) - The Canadian dollar fell
against its U.S. counterpart on Tuesday, dragged down by
sagging commodity prices and rising risk aversion after data
cast doubt on the strength of the U.S. economic recovery.
Figures released on Tuesday showed an unexpected drop in
U.S. home prices for December and a steep drop in U.S. consumer
confidence in February. [ID:nN23102211]
"We've had a lot of concerns about the global economic
recovery, what's going on in China, looking at the euro zone
and now you start getting concern that well, 'Does the U.S.
economic recovery scenario continue to remain in place?'" said
David Watt, a senior currency strategist at RBC Capital
The data affected oil prices, which often influence the
commodity-linked currency, dropping nearly 2 percent to below
$79 a barrel. [O/R]
Gold, copper and other base metals also crumbled,
bolstering the safe-haven U.S. dollar. [GOL/]
The Canadian dollar closed at C$1.0566 to the U.S. dollar,
or 94.64 U.S. cents, down from Monday's close at C$1.0426 to
the U.S. dollar, or 95.91 U.S. cents. Earlier, the currency
dropped to C$1.0580 or 94.52 U.S. cents, its lowest level since
"It's a classic risk-off (situation). We're seeing
commodities down, people selling Canada against yen and euro,
and it's hit some key levels and key stops," said Firas Askari,
head of foreign exchange trading at BMO Capital Markets.
Watt said the Canadian dollar's strong performance since
the start of the year, combined with a dented outlook for U.S.
economic recovery encouraged investors to cash out.
"The idea of profit taking coupled with some concerns on
the risk front are a very powerful one-two punch."
With global equity markets lower and a sharp drop in U.S.
consumer sentiment, safe haven Canadian government bond prices
followed their U.S. counterparts higher across the curve.
Market players were on guard for U.S. Federal Reserve
Chairman Ben Bernanke's semi-annual reports to Congress on the
state of the economy this week.
Investors are watching for clarity about the timing of
future hikes to the benchmark fed funds rate after the U.S.
central bank last week raised the discount rate.
The two-year Canadian government bond <CA2YT=RR> added 10
Canadian cents to C$100.34 to yield 1.331 percent, while the
10-year bond <CA10YT=RR> gained 60 Canadian cents to C$102.50
to yield 3.432 percent.
Canadian bonds outperformed their U.S. counterparts on the
short end of the curve, but lagged at the long end, with the
difference between 10-year yields narrowing about 3 basis
points to 25.7 basis points.
In other government bond news, the Bank of Canada said on
Tuesday it plans to buy back up to C$1 billion of eight
eligible issues of outstanding government bonds in a cash
management bond repurchase operation on March 2.
New issue activity included the province of New Brunswick
adding C$300 million in a reopening of bonds due Sept. 26,
2039, according to a term sheet seen by Reuters.
(Additional reporting by Ka Yan Ng; Editing by Jeffrey