TORONTO - The Canadian dollar was higher Monday as risk aversion faded with the decision by the United States and the European Union to impose only targeted sanctions after Crimeans voted on the weekend to leave Ukraine and join Russia.
The loonie rose 0.34 of a cent to 90.47 cents US.
European Union foreign ministers agreed to slap travel bans and asset freezes on 21 people from Russia and Crimea they have linked to the push for the secession.
Also, U.S. President Barack Obama signed an executive order that names seven Russian government officials as sanctions targets. The U.S. Treasury Department also is imposing sanctions on four Ukrainians, including former president Viktor Yanukovych.
And Prime Minister Stephen Harper said his government is also putting economic sanctions and travel restrictions on senior people in Russia, Ukraine and Crimea.
Analysts say this approach targeted at individuals as opposed to general trade indicates that western powers don't want to escalate an already fragile situation.
On the economic front, Statistics Canada said that Canadians added $2.3 billion of foreign securities to their holdings in January. It was the fourth straight month of such investment.
At the same time, foreign investors acquired $1.1 billion of Canadian securities, mainly in equities. As a result, the agency said that cross-border transactions in securities generated a net outflow of funds for a second consecutive month.
And U.S. factory production surged 0.8 per cent in February, nearly reversing a 0.9 per cent plunge in January that was due mainly to weather.
On the commodity markets, copper was unchanged at US$2.95 a pound after a string of negative data from China sent prices down eight per cent last week.
April crude dipped 81 cents to US$98.08 a barrel. Gold prices faded $6.10 to US$1,372.90 an ounce after nervous investors pushed prices ahead last week.
Traders also looked ahead to Wednesday afternoon when the U.S. Federal Reserve makes its next interest rate announcement, followed by a news conference with new central bank chair Janet Yellen.
Traders will be looking for any change in a gauge the Fed is using for interest rate guidance â€” the jobless rate. Generally, markets aren't expecting a rate hike from the Fed until the middle of next year at the earliest.
Also, the Fed will likely send the message that the economy is strong enough to carry on with its program of cutting back on its bond purchases, the stimulus program that kept long term rates low and encouraged a strong rally on stock markets.
Markets expect the Fed to cut its monthly bond purchases by another $10 billion to $55 billion a month.
Meanwhile, Chinese officials announced on the weekend that exchange rate controls would be modestly eased. It was the latest step in a plan to eventually let the yuan float freely.
The yuan reversed course recently after strengthening steadily for years. Analysts believe the central bank is guiding the exchange rate lower against the U.S. dollar in an effort to discourage speculators from moving money into the country to profit from the yuanâ€™s rise.