CANADA FX DEBT-C$ flat as caution tempers impact of current account data

Reuters

* Canadian dollar at C$1.1131 or 89.84 U.S. cents * Bond prices higher across the maturity curve By Leah Schnurr TORONTO, Feb 27 (Reuters) - The Canadian dollar was little changed on Thursday as caution over political tensions in Ukraine was offset by data showing the domestic current account deficit widened less than expected.

Investors bought up safe-haven assets after armed men seized regional government headquarters and parliament in Ukraine's Crimea and raised the Russian flag.

Crimea, the only Ukrainian region with an ethnic Russian majority, is the last big bastion of opposition to the new leadership in Ukraine, after the removal of the country's president last weekend.

The developments put investors on edge and gave the loonie a negative tone in early trading as it was hurt by the lack of risk appetite.

"If you look at the sentiment in the market, it's trading in a bit of a risk-off mood, so there's some scope for the Canadian dollar to get dragged along with that," said Mazen Issa, macro strategist at TD Securities in Toronto.

The currency came off its session lows after data showed Canada's current account deficit was not as large in the fourth quarter as analysts had expected, while previous deficits were revised lower.

Still, the gap of $16.01 billion ($14.42 billion) in the final months of last year was the fourth-largest ever, and the Canadian dollar remained in a tight range.

"That narrative of weakness in net exports still persists, so that doesn't really change the implications for fourth-quarter gross domestic product tomorrow. We're still expecting to see a net export drag in tomorrow's report," said Issa.

The Canadian dollar was at C$1.1131 to the greenback, or 89.84 U.S. cents, a touch weaker than Wednesday's close of C$1.1128, or 89.86 U.S. cents.

Friday's fourth-quarter gross domestic product is expected to show growth slipped to a 2.5 percent annualized rate, though economists expect some of the quarter may have been affected by harsh winter weather.

Later on Thursday morning, investors will be watching comments from new Federal Reserve Chair Janet Yellen, who will be testifying before U.S. lawmakers. Yellen's appearance was postponed by two weeks due to a snowstorm in Washington.

Canadian government bond prices were higher across the maturity curve, with the two-year up half a Canadian cent to yield 1.002 percent and the benchmark 10-year up 16 Canadian cents to yield 2.429 percent.

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