Canadian dollar firms but ends weakest year since 2008

Tue Dec 31, 2013 2:15pm EST
 
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By Leah Schnurr

TORONTO (Reuters) - The Canadian dollar rose slightly against the greenback on Tuesday, even as it was closing out its weakest year since 2008, with analysts expecting a dovish Bank of Canada will spell more pressure for the currency next year.

Trading was light heading into the New Year's Day holiday and with no domestic economic data on tap until later in the week.

South of the border, data showed U.S. home price gains slowed in October, while consumers' moods improved this month, though the reports had little impact on the loonie.

But traders were mostly focused on the year ahead. Sentiment has turned bearish against the Canadian dollar in recent months as the Bank of Canada shifted to a more neutral stance, which has markets expecting interest rates will stay low for longer.

The gradual unwinding of the U.S. Federal Reserve's economic stimulus is also expected to weigh on the Canadian currency next year.

"The loonie has been pretty battered over the course of 2013," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.

"It looks like there's not a lot that's going to be coming up in the first half of next year that we really see the loonie gaining back any of that strength."

Smith sees the Canadian dollar weakening further in the first half of 2014 but said the currency should get a reprieve in the latter half of the year as Canada starts to benefit from a pick-up in the U.S. economic recovery.   Continued...

 
The new Canadian five and 10 dollar bills, made of polymer, are displayed with the previously released 20, 50 and 100 dollar notes following an unveiling ceremony at the Bank of Canada in Ottawa April 30, 2013. REUTERS/Chris Wattie