4 Min Read
* Canadian dollar closes at C$1.1011 or 90.09 U.S. cents * Bond prices lower across maturity curve * Ukraine tensions seen weighing on rangebound loonie By Leah Schnurr and Alastair Sharp TORONTO, March 4 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Tuesday, despite comments from Russia's president that he currently saw no need to use military force in Ukraine's Crimea region, which helped calm more risk-averse investors. Stocks, currencies and other markets have been volatile in recent sessions after Russia seized parts of Crimea following last month's ouster of Ukraine's Moscow-backed leader. "Market price action today has been Ukrainian-headline driven, there's been a couple risk-off-type headlines we saw," said Greg Moore, senior currency strategist at Royal Bank of Canada. But Moore added that notwithstanding the increased tensions in the Black Sea region, the dollar-Canada pair would remain in an established range between the low-to-mid-C$1.10s and low-to-mid-C$1.11s. "We're just essentially in that consolidation range, so despite the fact we may have spiked higher on some kind of headline, I think the neutral trend is still intact," he said. Russian President Vladimir Putin on Tuesday said Russia would only use military force in Ukraine as a "last resort," remarks that were seen as being intended to ease fears that tensions could lead to war. "Probably the single biggest driver of currencies in the European session was the news surrounding Ukraine," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto. "The Canadian dollar is very sensitive to global risk dynamics and typically when global risk is elevated or risk aversion is rising, the Canadian dollar weakens." The Canadian dollar ended the session at C$1.1100 to the greenback, or 90.09 U.S. cents, a touch weaker than Monday's close of C$1.1084, or 90.22 U.S. cents. Investors were also turning their attention to Wednesday's Bank of Canada meeting. The central bank is expected to hold interest rates at 1 percent, but economists will be watching the accompanying statement for any change in tone. The Bank of Canada (BoC) took a more dovish shift in policy last year, and left the door open to a cut in interest rates at its most recent meeting in January, saying it was more concerned about the weak inflation environment. But data since then showed January's inflation rate rose more than expected and analysts say that will likely prompt the central bank to hold the line on Wednesday. "I would expect Governor Poloz maintains a neutral bias and that the tone is quite similar to what we heard in January, with the potential that he makes a brief reference to weather-disrupted data and how the (BoC) is viewing that," Sutton said. Until then, the currency is likely to stay in a range similar to what was seen in Monday's session between C$1.1039 and C$1.1110, Sutton said. "Most of the major currencies have really been stuck in ranges over the last couple weeks and the Canadian dollar is no exception to that. We're likely to see that continue," she added. Canadian government bond prices were lower across the maturity curve, with the two-year off 0.6 Canadian cents to yield 1.030 percent and the benchmark 10-year slumping 64 Canadian cents to yield 2.473 percent.