The Canadian Press - ONLINE EDITION

Loonie lower, markets risk-averse amid airliner crash, Mideast fighting

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TORONTO - The Canadian dollar closed lower Thursday with traders becoming risk averse in the wake of the crash of a Malaysian Airlines jetliner in eastern Ukraine.

The currency lost 0.11 of a cent to 92.95 cents US, but found some support from higher oil and gold prices after Ukraine said a passenger plane carrying 295 people was shot down Thursday as it flew over the country. The plane appeared to have broken up before impact.

Nervous investors sent August bullion up $17.10 to US$1,316.90 an ounce.

Traders also bought into other safe havens such as U.S. Treasuries and the American benchmark 10-year bond stood at 2.46 per cent late in the afternoon, down about eight basis points from Wednesday.

Jitters also increased late in the session after the Israeli military said it had launched a ground operation in the Gaza Strip.

Markets were already cautious during the morning because of the latest round of sanctions levied against Russia by the United States.

President Barack Obama announced broader sanctions against Russia, targeting two major energy companies, a pair of powerful financial institutions, eight weapons firms and four individuals. The increased U.S. economic pressure is designed to end the insurgency in eastern Ukraine that is widely believed to be backed by the Kremlin.

"The escalated sanctions against Russia targets a number of regional companies and the United States has confirmed that it will aim to prevent them from accessing all but short-term capital markets," observed Mark Chandler, head of Canadian FIC strategy at RBC Dominion Securities.

Also, the European Union has said it will halt lending for public infrastructure projects in Russia by the European Investment Bank.

"In concert, the lack of any meaningful data, coupled with the sanctions imposed overnight, has led to an old-fashioned 'risk off' day, with equity prices lower and bond prices higher," added Chandler.

Oil prices shot up for a second day with the August contract on the New York Mercantile Exchange up $1.99 to US$103.19 a barrel. Prices ran ahead $1.24 Wednesday in the wake of data showing a much larger than expected drawdown of U.S. inventories last week.

The September copper contract in New York was a cent higher at US$3.22 a pound.

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