TORONTO: The Canadian dollar weakened against the greenback on Friday, retreating from a strong gain the previous session, as worries ahead of a referendum in Crimea on separating from Ukraine prompted investors to push into safer assets.
The only domestic economic data that had been on tap for the day showed the ratio of Canadian household debt to income in the fourth quarter of last year slipped to 164 percent after hitting a record high in the third quarter. The report had little impact on the loonie.
Overseas, Russia shipped more troops and armor into Crimea on Friday and repeated its threat to invade other parts of Ukraine. Pro-Moscow authorities in Crimea will hold a vote over the weekend on whether the peninsula should leave Ukraine and join Russia, a move that would likely to lead to US and EU sanctions.
"The big worry is that the outcome of the referendum is a 'yes' to essentially breaking away from Ukraine," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.
"It's definitely moving to escalating where there will be sanctions against Russia - the ball is already in motion with that - and will likely see tensions really escalate and movement from the West escalate as well."
The Canadian dollar was at C$1.1087 to the greenback, or 90.20 US cents, weaker than Thursday's close of C$1.1053, or 90.47 US cents.
Firmer oil prices helped underpin the Canadian dollar, preventing it from falling too steeply, Smith said. The loonie will likely be capped around C$1.1120 to C$1.1130 heading into the geopolitical risk over the weekend, while the currency is likely to see a floor of around C$1.1050 to C$1.1040, he said.
Canadian government bond prices were higher across the maturity curve, with the two-year up 1 Canadian cent to yield 1.002 percent and the benchmark 10-year up 24 Canadian cents to yield 2.360 percent.
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