CANADA FX DEBT-C$ slide on Syria worries is limited by oil's jump

Wed Aug 28, 2013 4:55pm EDT
 
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* C$ at C$1.0485 vs US$, or 95.37 U.S. cents
    * Oil surges as Syria tensions stir Mideast supply concern
    * C$ strengthens against range of other currencies

    By Alastair Sharp
    TORONTO, Aug 28 (Reuters) - The Canadian dollar weakened
slightly against the U.S. dollar on Wednesday as jitters over a
possible Western military strike on Syria pushed investors to
seek the safe-haven greenback, but rising oil prices limited the
loonie's weakness.
    Brent crude hit a six-month high and U.S. crude peaked at
its highest level since May 2011 as the threat of an escalation
of the Syrian conflict stirred concerns over Middle East oil
supplies. 
    "Oil prices have elevated and held Canada in, but some of
that could be given back if we see a pronounced flight to the
U.S. dollar," said Don Mikolich, executive director of foreign
exchange sales at CIBC World Markets.
    "Eyes are still on Middle East developments and any
potential flight to safety that might come with a military
strike," he said.
    Washington and its European and Middle Eastern allies said
Syria's President Bashar al-Assad must face retribution for
using chemical weapons against his people.     
    CIBC's Mikolich said the Canadian currency would likely
suffer in the immediate aftermath of a military move, but could
strengthen if tensions subside and oil prices remains elevated.
    Canada is a major energy exporter and higher oil prices
often boost its currency.
    The Canadian dollar ended the session trading at
C$1.0485 versus the greenback, or 95.37 U.S. cents, weaker than
Tuesday's North American finish of C$1.0474, or 95.47 U.S.
cents.
    "Yesterday ... the markets ended up paying a little bit more
attention to what we saw in terms of rising energy prices and
that seems to have halted the deterioration in the Canadian
dollar," said Mark Chandler, head of Canadian fixed income and
currency strategy at RBC Capital Markets.
    "That's providing some offset to the broader risk-off move,"
he added. "When people look at Canada, and they look at it from
the perspective of commodities, they have been - rightly so -
paying more attention to it in terms of the energy impact."
    The Canadian dollar did make gains against other major
currencies, including the commodity-linked Australian dollar
, as well as the euro and yen.
    Geopolitical worries are expected to dominate currency
moves, at least until Friday, when Canadian economic growth data
for the second quarter is released.
    Canadian government bond prices fell across the maturity
curve. The two-year bond fell 7 Canadian cents,
yielding 1.200 percent, while the benchmark 10-year bond
 retreated 52 Canadian cents, yielding 2.628 percent.