CANADA FX DEBT-C$ weakens as Ukraine vote on Sunday stirs safety bid

Fri Mar 14, 2014 4:20pm EDT

* Canadian dollar at C$1.1095 or 90.13 U.S. cents
    * Bond prices mixed across the maturity curve


    By Leah Schnurr
    TORONTO, March 14 (Reuters) - The Canadian dollar weakened
against the greenback on Friday, a day after a strong gain, 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 European Union is expected to impose travel bans and
asset freezes next week on dozens of Russians involved in
Moscow's gradual takeover of Crimea, European diplomats said. 
    "The market's just got a cautionary tone going into that
event risk," said Gareth Sylvester, director at Klarity FX in
San Francisco. "It absolutely just heightens tensions between
the Europeans and Russia."
    The Canadian dollar ended the North American
session at C$1.1095 to the greenback, or 90.13 U.S. cents,
weaker than Thursday's close of C$1.1053, or 90.47 U.S. cents.
    "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."
    Investors also remained concerned about the strength of the
Chinese economy after disappointing data earlier in the week.
The loonie is sensitive to developments in China, which is the
world's second largest economy and a major consumer of
resources.
    Firmer oil prices helped underpin the Canadian dollar,
preventing it from falling too steeply, Smith said. 
    Canadian government bond prices were mixed across the
maturity curve, with the two-year unchanged to yield
1.007 percent and the benchmark 10-year off 5
Canadian cents to yield 2.392 percent.
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