CANADA FX DEBT-C$ drifts lower; investors await data later in week

Wed Feb 26, 2014 4:27pm EST

* Canadian dollar at C$1.1128 or 89.86 U.S. cents
    * Bond prices mostly higher across the maturity curve


    By Leah Schnurr
    TORONTO, Feb 26 (Reuters) - The Canadian dollar weakened
against the U.S. dollar on Wednesday as geo-political tensions
boosted the safe haven appeal of the greenback, while investors
were looking ahead to domestic economic data on tap at the end
of the week.
    Markets had a cautious tone as tensions grew in Ukraine
after Russia ordered troops to be ready for war games near the
border with Ukraine in a show of strength. 
    Investors were also watching developments in China's
currency. Dealers suspect the country's central bank has
engineered the recent decline in the yuan to inject more two-way
volatility into the market. The yuan on Tuesday saw its biggest
drop in three years. 
    "The continued weakness in the renminbi raised some question
marks about the economic performance and health of China. That's
putting a small negative emphasis on the adoption of risk," said
Gareth Sylvester, director at Klarity FX in San Francisco.
    Canada's currency is often sensitive to developments out of
China, the world's second-largest economy and a major consumer
of commodities.
    "It has people retrenching back to their traditional safe
havens," said Don Mikolich, executive director of foreign
exchange sales at CIBC World Markets in Toronto.
    "The Canadian dollar is not traditionally the biggest
recipient of that safe-haven flow. It causes people to be a
little more cautious in terms of where they're putting their
positions."
    The Canadian dollar ended the North American
session at C$1.1128 to the greenback, or 89.86 U.S. cents,
weaker than Tuesday's close of C$1.1086, or 90.20 U.S. cents.
    After pushing higher in the first weeks of February, the
Canadian dollar has given back that advance in recent sessions.
While the currency has stabilized after a sharp drop in January,
it is still not far from a 4-1/2-year low and most analysts
expect the loonie could see more downside.
    "The broader range is C$1.1020 to C$1.1180. Until we see a
break beyond that range, the market is just going to see lots of
choppy, sideways price action," said Sylvester.
    The Canadian economic calendar has been light this week but
the pace will pick up toward the end of the week with data on
the current account due Thursday and fourth-quarter gross
domestic product on Friday.
    Economic growth is forecast to have slowed to an annualized
2.5 percent in the last months of 2013, but analysts will be
looking to see how much of an impact harsh winter weather had on
the economy.
    Canadian government bond prices were mostly higher across
the maturity curve, with the two-year up 4 Canadian
cents to yield 1.003 percent and the benchmark 10-year
 up 38 Canadian cents to yield 2.444 percent.
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article