CANADA FX DEBT-C$ weaker as Cyprus deal pressures risk assets

* C$ at C$1.0217 vs US$ or 97.88 U.S. cents
    * Bailout plan for Cyprus will tax bank deposits
    * Foreigners acquire C$13.34 bln in Canadian securities in
    * Bond prices higher across curve

    By Solarina Ho
    TORONTO, March 18 (Reuters) - The Canadian dollar weakened
against the U.S. dollar on Monday after a bailout plan for
Cyprus, which will tax bank deposits in exchange for a 10
billion euro ($13 billion) bailout, sparked a sell-off in
riskier assets.
    The weekend announcement broke with previous EU practice
that depositors' savings were sacrosanct and led to worried
Cypriots emptying cash machines on the island. 
    "It's rather surprising news ... It did prompt a bit of a
risk-off reaction in the markets initially. That's
understandable given the uncertainty we have still surrounding
the situation there," said Shaun Osborne, chief currency
strategist at TD Securities.
    The Canadian dollar did pare overnight losses, prompted in
part by slightly better securities transaction data, which saw
foreigners acquire C$13.34 billion ($13.08 billion) of Canadian
securities in January. 
    This was due mainly to the biggest acquisition of Canadian
private corporate debt instruments since October 2001, according
to Statistics Canada. 
    At 9:32 a.m. (1332 GMT), the Canadian dollar was
trading at C$1.0217 against the greenback, or 97.88 U.S. cents,
higher than Friday's North American session close at C$1.0193,
or 98.11 U.S. cents. It had touched C$1.0251, or 97.55 U.S.
cents earlier on Monday.
    "We saw some strong inflows in January. The numbers are not
usually anything that moves the market to any significant
degree, so I don't think it's anything that's probably going to
overshadow the broader focus on risk," said Osborne, noting the
stronger correlation between the Canadian dollar and risk assets
    "Those correlations did really weaken off quite dramatically
at the start of the year. The focus was really on domestic
developments. But it's probably moving back toward a focus on
external issues as a potential driver for the Canadian dollar."
    It was outperforming most major foreign currencies except
for its commodities-linked counterparts of the New Zealand
 and Australian dollars. It touched its
strongest level against the euro in nearly two months.
    Canada's dollar is expected to trade between C$1.0200 and
C$1.0280 on Monday, according to Scotiabank.
    The price of Canadian government debt was higher across the
curve, with the two-year bond up 3.3 Canadian cents
to yield 0.972 percent, while the benchmark 10-year bond
 climbed 26 Canadian cents to yield 1.867 percent.