Loonie gets respite after recent drop

Mon Dec 30, 2013 4:23pm EST
 
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By Leah Schnurr

TORONTO (Reuters) - The Canadian dollar firmed against the greenback on Monday, clawing back some recent losses as investors sold the U.S. currency, though the bounce did not change analysts' bearish outlook on the loonie.

Market activity was muted and was likely to stay that way heading into the New Year's Day holiday on Wednesday. Lighter liquidity can exaggerate moves.

There is no Canadian economic data on tap until the new year, but south of the border data showed contracts to purchase previously owned U.S. homes edged up in November. Still, the lack of significant releases is likely to leave the Canadian currency searching for direction.

"There's a clear lack of liquidity in the marketplace," said Gareth Sylvester, director at Klarity FX in San Francisco.

The Canadian dollar ended the North American session at C$1.0640 to the greenback, or 93.98 U.S. cents, stronger than Friday's close of C$1.0704, or 93.42 U.S. cents.

The Canadian dollar traded as low as C$1.0728 overnight. The U.S. dollar .DXY lost 0.5 percent against a basket of currencies.

After losing more than 7 percent this year, many analysts expect the loonie to continue to weaken in 2014. A more neutral stance from the Bank of Canada and the ongoing reduction of the Federal Reserve's economic stimulus program is seen keeping pressure on the Canadian dollar.

Monday's gains do not change the longer-term view, said Sylvester.   Continued...

 
Bank of Canada Governor Stephen Poloz presents the new Canadian five dollar bill made of polymer that is entering circulation today, at the Canadian Space Agency in St. Hubert, Quebec November 7, 2013. REUTERS/Christinne Muschi