November 28, 2012 / 2:19 PM / 6 years ago

Canadian dollar lower as "fiscal cliff", M&A uncertainty weighs

TORONTO (Reuters) - The Canadian dollar was marginally weaker against the U.S. dollar on Wednesday, as growing concern over a political standoff in the United States weighed on risk appetite and investors awaited approval of two pending resource acquisitions.

The risk proxy Canadian currency followed most world equity markets lower, making for a third day of weakness after last week’s solid performance.

“Canada still seems an OK story but there’s uncertainty around the U.S. ‘fiscal cliff’ (and there is) still uncertainty around some of the big M&A deals, the Nexen and Progress deals,” said Shane Enright, executive director of foreign exchange sales at CIBC World Markets.

A leading U.S. Democrat on Tuesday lamented the lack of progress in talks to avoid a looming fiscal crisis which threatens to push the world’s largest economy back into recession.

China’s state-owned CNOOC Ltd (0883.HK) and its Canadian takeover target Nexen Inc NXY.TO have withdrawn and resubmitted an application for U.S. approval of their $15.1 billion deal, as Canada gets close to its decision on whether to approve the transaction.

At 8:17 a.m. (1317 GMT) the Canadian dollar was trading at C$0.9949 to the greenback, or $1.0051, compared with C$0.9947, or $1.0053, at Tuesday’s North American close.

Enright said the currency would likely trade between C$0.99 and equal value with the U.S. currency in the short term.

Applications for U.S. home mortgages fell last week, though demand for mortgage purchases rose for a fourth straight week, an industry group said.

Prices for Canadian government debt were higher across the curve, with the two-year bond up 1.5 Canadian cents to yield 1.087 percent and the benchmark 10-year bond rising 25 Canadian cents to yield 1.702 percent.

Reporting by Alastair Sharp; Editing by Theodore d'Afflisio

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