CANADA FX DEBT-Loonie softens as Ukraine, Gaza crises cut risk appetite
July 21, 2014
By Leah Schnurr
The Canadian dollar weakened modestly against the greenback on Monday, hurt by a lack of risk appetite in global markets as fighting flared in Ukraine and hostilities continued in Gaza.
With the Bank of Canada sticking to its neutral policy stance and with little domestic economic data on tap, the loonie was expected to trade in a range, but market focus was on the hot spots around the world.
In Ukraine, fighting broke out in the eastern city of Donetsk while international investigators arrived to inspect the bodies of the victims of last week’s downed Malaysian flight.
Meanwhile, the death toll from the two-week conflict between Israeli forces and Palestinian militants passed 500 as Israeli jets, tanks and artillery continued to pound the Gaza Strip.
“The economic calendar is pretty sparse today, so the focus for financial markets in general is going to be mainly on the Ukraine and Gaza geopolitical tensions,” said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.
“With those not subsiding over the weekend and early today at all, we’re seeing a pretty broad-based risk-off feel to the markets this morning.”
The Canadian dollar was at C$1.0744 to the greenback, or 93.08 U.S. cents, slightly weaker than Friday’s close of C$1.0736, or 93.14 U.S. cents.
In a relatively subdued week, Wednesday’s Canadian retail sales data for May will be a focal point, as will Tuesday’s inflation data out of the United States.
The U.S. dollar-Canadian dollar pairing is likely to be tightly capped between C$1.08 and C$1.07, but a breakout above C$1.08 could become the start of another leg higher, Smith said.
That could see the pairing creep up to the mid-C$1.09s, he said.
Canadian government bond prices were mostly higher across the maturity curve, though the two-year was off half a Canadian cent to yield 1.083 percent. The benchmark 10-year was up 17 Canadian cents to yield 2.147 percent.