CANADA FX DEBT-C$ firms as risk aversion fades after Crimea vote

Reuters

* Canadian dollar at C$1.1076 or 90.29 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 referendum, which Ukraine called illegal, was strongly in favor of seceding from Ukraine. European Union foreign ministers met to decide on sanctions against Russian and Crimean officials held responsible for Moscow's military seizure of the southern Ukrainian region.

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 already priced into the market, said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto.

"The next steps now are just to see exactly whether Russia's ambitions go further than Crimea or if this is the end target," Mikolich said. "Politically, I think there will still be some discussion, as governments aren't recognizing the results and what that will mean for future sanctions." The Canadian dollar was at C$1.1076 to the greenback, or 90.29 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," Mikolich said.

The loonie is frequently sensitive to developments in China, which is the world's second-largest economy and a major consumer of natural resources.

Data on Monday showed foreigners returned to buying Canadian securities in January, acquiring C$1.09 billion ($980 million) in Canadian assets after a large divestment in December. The data had little immediate impact on the loonie.

Canadian government bond prices were lower across the maturity curve, with the two-year off 2 Canadian cents to yield 1.020 percent and the benchmark 10-year down 9 Canadian cents to yield 2.405 percent.

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