CANADA FX DEBT-Loonie weaker on U.S. shutdown, Yellen nomination
* C$ at C$1.0394 vs US$, or 96.21 U.S. cents * Janet Yellen nominated to head Federal Reserve * Shutdown, looming debt ceiling deadline has markets wary * Bond prices lower By Leah Schnurr TORONTO, Oct 9 (Reuters) - The Canadian dollar weakened on Wednesday as the U.S. government shutdown stretched on and as the nomination of Janet Yellen to run the Federal Reserve pushed the greenback higher. Investors also parsed minutes from last month's Fed meeting that showed its unexpected decision not to withdraw its economic stimulus was a "relatively close call". The loonie weakened to near session lows shortly after the minutes were released. President Barack Obama nominated Fed number two Yellen on Wednesday to head the central bank. Investors were relieved to get clarity on at least one unknown in the markets, and analysts say she will move cautiously in reining in the economic stimulus the Fed has put in place. At the same time, the partial federal government shutdown in the United States was in its ninth day, though there were signs of hope for a resolution. Members of both parties floated the possibility of a short-term increase in the debt limit to allow time for broader negotiations on the budget. A impasse has closed non-essential U.S. government services since early last week and the showdown is bringing lawmakers closer to a separate and more crucial mid-October deadline to raise the debt ceiling to avoid a potential default. Investors are concerned the government shutdown will start to bite into economic growth, which could hurt Canada, the largest trading partner with the United States. "No matter what happens with the fiscal situation, I believe the Canadian dollar is in a bit of trouble. Bad for the U.S. equals bad for North America," said John Curran, senior vice president at CanadianForex in Toronto. "If they sort it out, that would be good for the dollar, so it's a bit of a double-whammy." The Canadian dollar ended the session at C$1.0394, or 96.21 U.S. cents, weaker than Tuesday's close of C$1.0368, or 96.45 U.S. cents. The U.S. dollar was up 0.4 percent against a basket of currencies. The United States has until mid-October before it hits the $16.7 trillion borrowing limit. The impasse was reminiscent of the 2011 showdown over the debt ceiling, which yielded an agreement only at the last minute. "Accidents do happen when you're playing with fire. They avoided it last time, who knows if they'll avoid it this time," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets in Toronto. "I'd expect something short-term - a few weeks or months - to give the government more time to negotiate amongst themselves." Prices for Canadian government bonds were lower across the maturity curve. The two-year bond slipped 2 Canadian cents to yield 1.200 percent, while the benchmark 10-year bond fell 10 Canadian cents to yield 2.579 percent.
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