CANADA FX DEBT-C$ drifts lower; investors await data later in week
* Canadian dollar at C$1.1128 or 89.86 U.S. cents * Bond prices mostly higher across the maturity curve By Leah Schnurr TORONTO, Feb 26 (Reuters) - The Canadian dollar weakened against the U.S. dollar on Wednesday as geo-political tensions boosted the safe haven appeal of the greenback, while investors were looking ahead to domestic economic data on tap at the end of the week. Markets had a cautious tone as tensions grew in Ukraine after Russia ordered troops to be ready for war games near the border with Ukraine in a show of strength. Investors were also watching developments in China's currency. Dealers suspect the country's central bank has engineered the recent decline in the yuan to inject more two-way volatility into the market. The yuan on Tuesday saw its biggest drop in three years. "The continued weakness in the renminbi raised some question marks about the economic performance and health of China. That's putting a small negative emphasis on the adoption of risk," said Gareth Sylvester, director at Klarity FX in San Francisco. Canada's currency is often sensitive to developments out of China, the world's second-largest economy and a major consumer of commodities. "It has people retrenching back to their traditional safe havens," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. "The Canadian dollar is not traditionally the biggest recipient of that safe-haven flow. It causes people to be a little more cautious in terms of where they're putting their positions." The Canadian dollar ended the North American session at C$1.1128 to the greenback, or 89.86 U.S. cents, weaker than Tuesday's close of C$1.1086, or 90.20 U.S. cents. After pushing higher in the first weeks of February, the Canadian dollar has given back that advance in recent sessions. While the currency has stabilized after a sharp drop in January, it is still not far from a 4-1/2-year low and most analysts expect the loonie could see more downside. "The broader range is C$1.1020 to C$1.1180. Until we see a break beyond that range, the market is just going to see lots of choppy, sideways price action," said Sylvester. The Canadian economic calendar has been light this week but the pace will pick up toward the end of the week with data on the current account due Thursday and fourth-quarter gross domestic product on Friday. Economic growth is forecast to have slowed to an annualized 2.5 percent in the last months of 2013, but analysts will be looking to see how much of an impact harsh winter weather had on the economy. Canadian government bond prices were mostly higher across the maturity curve, with the two-year up 4 Canadian cents to yield 1.003 percent and the benchmark 10-year up 38 Canadian cents to yield 2.444 percent.
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