* CAD rallies vs Aussie, GBP, supported vs USD
* Conservatives' vote win quells political uncertainty
* Analysts expect CAD to extend broad gains
LONDON, May 3 The Canadian dollar rallied on
Tuesday after Canada's Conservative party clinched an outright
election victory, and the currency was poised for more gains as
the majority win erased fears of political instability.
The Canadian currency hovered near a 3 1/2-year high against
the U.S. dollar. It also rallied against the Australian dollar,
which relinquished gains made during the election campaign as
the pro-worker New Democratic Party soared in popularity.
The ruling Conservatives secured 54 percent of seats in the
G7 country's parliament on Monday, resulting in a majority
government which offers Prime Minister Stephen Harper free reign
to keep corporate taxes low and a tight grip on public spending.
"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 Democrat Party. What
we should see now is that trade unwinding."
Investors had dumped the Canadian dollar versus its
Australian counterpart in the past month after swelling support
for the NDP raised the nightmare scenario for markets of an
unstable minority government headed by the left-leaning party.
The Canadian dollar was broadly supported in European trade,
with the U.S. dollar CAD=D4 hovering around $0.9500, not far
from the day's low of $0.9460.
Broad weakness in the U.S. currency has offered a boost to
the Canadian dollar, which climbed as high as C$0.9440, its
strongest since late 2007.
"CAD can now play catch-up both against the USD and indeed
against its commodity cousins," BNP Paribas analysts said in a
note. "A break of support at C$0.9450 opens the way towards the
November 2007 low at C$0.9071.
The Australian dollar AUDCAD=R fell around half a percent
on the day to A$1.0338, retreating from $1.0443 hit late last
week, its strongest since early 2004.
Cole at RBC said he expected the Aussie's near term retreat
to extend to around A$1.02, a key pivot level which acted as
resistance to the Aussie's uptrend on two occasions in late
Sterling GBPCAD=R traded near a session low of C$1.5663,
down roughly 1 percent on the day.
(Reporting by Naomi Tajitsu; Editing by Catherine Evans)