CANADA FX DEBT-C$ sags vs yen as investors shun risk on Syria

Tue Aug 27, 2013 10:09am EDT
 
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* C$ falls 1.2 pct to lowest vs yen since Aug. 8
    * C$ at C$1.0525 vs US$, or 95.01 U.S. cents
    * Talk of Western strike against Syria's government forces
    * Bond prices rise

    By Solarina Ho
    TORONTO, Aug 27 (Reuters) - The Canadian dollar traded
steady against its U.S. counterpart but sagged against the
Japanese yen as talk of an imminent Western strike against Syria
drove investors to perceived safe haven currencies.
    Western powers told the Syrian opposition to expect a strike
against President Bashar al-Assad's forces within days,
according to sources who attended a meeting between envoys and
the Syrian National Coalition in Istanbul. 
    The move came after hundreds of civilians, including
children, were killed in rebel-held suburbs of Damascus in what
many suspect to be a poison gas attack. 
    "A lot of it has been the news overnight that there's
probably a military operation being prepared against Syria,"
said Charles St-Arnaud, economist and currency strategist with
Nomura Securities in New York.
    "That has been causing a sell-off of a lot of what you would
call the risky currencies," he added.
    Compared with such currencies as the yen, the Canadian
dollar is considered riskier since it has a high exposure to
fluctuations of its large natural resources exports, such as
oil.
    The yen usually climbs in times of financial market stress
and geopolitical uncertainty while growth-linked higher-yielding
currencies are sold off. 
     The Canadian dollar fell 1.2 percent against the yen
 to 93.61 yen,  hitting its lowest against the
Japanese currency since Aug. 8.
     Against the U.S. dollar, the Canadian dollar traded at
$1.0508 or 95.17 U.S. cents. This was minutely softer than
Monday's finish at C$1.0503, or 95.21 U.S. cents.
    St-Arnaud, who noted the Canadian currency's weakness
despite oil prices that climbed on rising tensions over Syria,
said the bulk of Tuesday's action will likely be from
geopolitical tensions. 
    The Canadian dollar traded as firm as C$1.0498 and as soft
as C$1.0540. Economists are expecting an index reading of 79.0.
 
    Canadian government bond prices were higher across the
curve, with the two-year bond rising 2.5 Canadian
cents to yield 1.173 and the benchmark 10-year bond 
climbing 31 Canadian cents to 2.612 percent.