CANADA FX DEBT-C$ weakens as Ukraine jitters lift greenback

Mon Mar 3, 2014 9:59am EST

* Canadian dollar at C$1.1085 or 90.21 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, March 3 (Reuters) - The Canadian dollar weakened on
Monday as safe-haven buying of the greenback increased as
Russian President Vladimir Putin's forces tightened their grip
on the Crimea region.
    Overseas data added to the pressure on the currency after
data showed manufacturing activity in China contracted in
February, falling for the third month in a row. The loonie is
sensitive to economic developments in China, the world's
second-largest economy and a major consumer of resources.
 
    The Canadian dollar pared some declines on data that showed
Canadian manufacturers' prices climbed much more than expected
in January, largely due to a weaker Canadian dollar.
 
    But the currency was unable to overcome market concern about
the situation in Ukraine. Ukraine said Russia was building up
armoured vehicles on its side of a narrow stretch of water
closest to Crimea after Putin declared at the weekend he had the
right to invade his neighbour to protect Russian interests and
citizens. 
    "We're seeing risk-averse sentiment really dominate price
action this morning," said Scott Smith, senior market analyst at
Cambridge Mercantile Group in Calgary.
    "Investors are really looking toward those safe-haven asset
classes and safety is garnering a premium this morning, which is
in turn dragging the loonie lower."
    The Canadian dollar was at C$1.1085 to the
greenback, or 90.21 U.S. cents, weaker than Friday's close of
C$1.1074, or 90.30 U.S. cents.
    Investors were also turning their attention to the Bank of
Canada's policy announcement later in the week. With the central
bank expected to hold interest rates at 1 percent, investors
will be parsing its statement for any change in language.
 
    Bank of Canada Governor Stephen Poloz recently said that two
months of stronger inflation in Canada has made the central bank
feel a "little more comfortable".
    "With the CPI data coming in a little better than analysts
were expecting, it's given Poloz and the Bank of Canada a little
more reason to be comfortable in terms of the inflation
picture," Smith said.
    "I don't really think they'll be changing either any
language in the steatement or their outlook for inflation going
forward."
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 0.8 Canadian
cents to yield 0.997 percent and the benchmark 10-year
 up 16 Canadian cents to yield 2.411 percent.
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