CANADA FX DEBT-C$ flat as caution tempers impact of current account data

Thu Feb 27, 2014 9:38am EST

* Canadian dollar at C$1.1131 or 89.84 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Feb 27 (Reuters) - The Canadian dollar was little
changed on Thursday as caution over political tensions in
Ukraine was offset by data showing the domestic current account
deficit widened less than expected.
    Investors bought up safe-haven assets after armed men seized
regional government headquarters and parliament in Ukraine's
Crimea and raised the Russian flag. 
    Crimea, the only Ukrainian region with an ethnic Russian
majority, is the last big bastion of opposition to the new
leadership in Ukraine, after the removal of the country's
president last weekend.
    The developments put investors on edge and gave the loonie a
negative tone in early trading as it was hurt by the lack of
risk appetite.
    "If you look at the sentiment in the market, it's trading in
a bit of a risk-off mood, so there's some scope for the Canadian
dollar to get dragged along with that," said Mazen Issa, macro
strategist at TD Securities in Toronto.
    The currency came off its session lows after data showed
Canada's current account deficit was not as large in the fourth
quarter as analysts had expected, while previous deficits were
revised lower.
    Still, the gap of $16.01 billion ($14.42 billion) in the
final months of last year was the fourth-largest ever, and the
Canadian dollar remained in a tight range. 
    "That narrative of weakness in net exports still persists,
so that doesn't really change the implications for
fourth-quarter gross domestic product tomorrow. We're still
expecting to see a net export drag in tomorrow's report," said
Issa.
    The Canadian dollar was at C$1.1131 to the
greenback, or 89.84 U.S. cents, a touch weaker than Wednesday's
close of C$1.1128, or 89.86 U.S. cents.
    Friday's fourth-quarter gross domestic product is expected
to show growth slipped to a 2.5 percent annualized rate, though
economists expect some of the quarter may have been affected by
harsh winter weather. 
    Later on Thursday morning, investors will be watching
comments from new Federal Reserve Chair Janet Yellen, who will
be testifying before U.S. lawmakers. Yellen's appearance was
postponed by two weeks due to a snowstorm in Washington.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up half a Canadian
cent to yield 1.002 percent and the benchmark 10-year
 up 16 Canadian cents to yield 2.429 percent.
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