CANADA FX DEBT-C$ weakens as Ukraine vote nears

Fri Mar 14, 2014 9:46am EDT

* Canadian dollar at C$1.1087 or 90.20 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, March 14 (Reuters) - The Canadian dollar weakened
against the greenback on Friday, retreating from a strong gain
the previous session, as worries ahead of a referendum in Crimea
on separating from Ukraine prompted investors to push into safer
assets. 
    The only domestic economic data that had been on tap for the
day showed the ratio of Canadian household debt to income in the
fourth quarter of last year slipped to 164 percent after hitting
a record high in the third quarter. The report had little impact
on the loonie. 
    Overseas, Russia shipped more troops and armor into Crimea
on Friday and repeated its threat to invade other parts of
Ukraine. Pro-Moscow authorities in Crimea will hold a vote over
the weekend on whether the peninsula should leave Ukraine and 
join Russia, a move that would likely to lead to U.S. and EU
sanctions. 
    "The big worry is that the outcome of the referendum is a
'yes' to essentially breaking away from Ukraine," said Scott
Smith, senior market analyst at Cambridge Mercantile Group in
Calgary.
    "It's definitely moving to escalating where there will be
sanctions against Russia - the ball is already in motion with
that - and will likely see tensions really escalate and movement
from the West escalate as well."
    The Canadian dollar was at C$1.1087 to the
greenback, or 90.20 U.S. cents, weaker than Thursday's close of
C$1.1053, or 90.47 U.S. cents.
    Firmer oil prices helped underpin the Canadian dollar,
preventing it from falling too steeply, Smith said. The loonie
will likely be capped around C$1.1120 to C$1.1130 heading into
the geopolitical risk over the weekend, while the currency is
likely to see a floor of around C$1.1050 to C$1.1040, he said. 
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1 Canadian cent
to yield 1.002 percent and the benchmark 10-year up
24 Canadian cents to yield 2.360 percent.
FILED UNDER: