CANADA FX DEBT-C$ firms as risk aversion fades after Crimea vote
* Canadian dollar at C$1.1053 or 90.47 U.S. cents * Bond prices lower across the maturity curve By Leah Schnurr TORONTO, March 17 (Reuters) - The Canadian dollar strengthened against the greenback on Monday on market relief that the referendum in Crimea on Sunday passed without major incident, making investors less averse to risk. Crimea formally applied to join Russia on Monday after the result of the referendum, which Ukraine called illegal, was strongly in favor of seceding from Ukraine. The United States and European Union imposed personal sanctions on Russian and Crimean officials involved in the seizure of Crimea from Ukraine. The Canadian dollar had been weaker on Friday as investors looked for safe havens ahead of the vote, fearing a major escalation of geopolitical tension. But the outcome was largely as expected and was already priced into the market, analysts said. "We still don't know how the whole Russia-Ukraine situation will play out ... but I think the fact that there's been no imminent risk, that has allowed everyone to take a sigh of relief and just focus back on the data and the markets," said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto. The Canadian dollar ended the North American session at C$1.1053 to the greenback, or 90.47 U.S. cents, stronger than Friday's close of C$1.1095, or 90.13 U.S. cents. Strength in the currency was limited by uncertainty over developments in China, where the central bank loosened its grip on the yuan over the weekend by doubling the daily trading range for the currency. China has promised it will allow market forces to play a greater role in the economy and its markets. The move follows recent concerns about the implications of slowing growth in China. "To some degree that reflects their weakening growth prospects and hence is weighing on commodity prices, which also act to soften the Canadian dollar," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. The loonie is frequently sensitive to developments in China, which is the world's second-largest economy and a major consumer of natural resources. Among the day's economic reports, data showed foreigners returned to buying Canadian securities in January, while a separate report showed sales of existing homes in Canada edged higher in February. Neither release had much impact on the loonie. Investors were also looking ahead to a speech by Bank of Canada Governor Stephen Poloz on Tuesday, as well as Janet Yellen's first meeting as chair of the U.S. Federal Reserve, with a policy statement and news conference on Wednesday. The Bank of Canada shifted policy gears late last year when it dropped any mention of interest rate hikes, and that more dovish policy tilt has been a major driver for the Canadian dollar in recent months. In its most recent policy announcement, the central bank continued to express concerns about weak inflation. "While I think the (Poloz) comments are important, I really don't think it's going to change anything because they've basically said they're going to wait for the data to play out," Madhavji said. While the Fed is expected to reduce its monthly bond-buying stimulus by another $10 billion, policymakers could decide to scrap their threshold of a 6.5 percent unemployment rate for considering a rise in interest rates. Canadian government bond prices were lower across the maturity curve, with the two-year off 4 Canadian cents to yield 1.031 percent and the benchmark 10-year down 34 Canadian cents to yield 2.433 percent.
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