CANADA FX DEBT-C$ stays rangebound to close out the week

Fri Apr 25, 2014 4:44pm EDT
 
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* Canadian dollar at C$1.1036 or 90.61 U.S. cents
    * Bond prices higher across the maturity curve

 (Adds details, quote, updates prices)
    By Leah Schnurr
    TORONTO, April 25 (Reuters) - The Canadian dollar weakened
modestly against the greenback on Friday as heightened tensions
in Ukraine made investors cautious and kept the currency stuck
in its recent trading range.
    The United States said it was prepared to impose further
targeted sanctions on Russia over its actions in Ukraine, where
armed pro-Moscow separatists seized a bus carrying international
mediators.   
    The crisis in the region has spurred an ebb and flow of risk
aversion in markets in recent months. 
    "The general theme today is there has been a bit of a
risk-off move across most asset classes," said Mazen Issa,
senior Canada macro strategist at TD Securities in Toronto.
    "It seems without a significant response from the political
powers, that the situation (in Ukraine) could deteriorate
further. I think that's what some of the concern is from a
markets perspective."
    Analysts said a speech by the head of the Bank of Canada
late on Thursday afternoon yielded few surprises. Governor
Stephen Poloz reiterated the central bank's neutral stance and
that an interest rate cut is just as possible as a rate hike.
Poloz also said he was more hopeful than before about an export
recovery. 
    "It really seems like the Bank of Canada wants to stay as
neutral for as long as possible. Of course, more on the dovish
side of that neutral bias," said Bipan Rai, director of foreign
exchange strategy at CIBC World Markets in Toronto.
    "I think they're going to try to do that for as long as they
can, at least until markets start considering Fed (rate) hikes
again."
    The Canadian dollar ended the North American
session at C$1.1036 to the greenback, or 90.61 U.S. cents,
slightly weaker than Thursday's close of C$1.1028, or 90.68 U.S.
cents. 
    The Canadian dollar's rally from March's 4-1/2-year low has
run out of momentum in the last two weeks. The currency has
traded sideways in recent sessions as it hovers around the
technically important C$1.10 level.
    Next week will offer some potentially market-moving factors,
including Canadian monthly gross domestic product figures.
Investors will also get a slew of data from south of the border,
including the April unemployment report and a policy-setting
meeting at the Federal Reserve.
    "Really, what we're looking for to shake U.S.
dollar-Canadian dollar out of this consolidative phase is
stronger U.S. data, which should potentially lead to an increase
in volatility in the front-end of the treasury curve and drive
bids for the (U.S.) dollar higher," Rai said.
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 0.8 Canadian
cents to yield 1.064 percent and the benchmark 10-year
 up 11 Canadian cents to yield 2.412 percent.

 (Editing by Peter Galloway)