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TORONTO (Reuters) - The Canadian dollar ended flat against its U.S. counterpart on Friday as the Europe-led rally lost momentum and investors took a breather from riskier assets ahead of an action-filled week.
The currency still held above parity though, following its biggest one-day gain since early August, after a long-awaited agreement to help contain the euro zone's debt crisis and strong U.S. economic data spurred a powerful surge across financial markets.
"The market has seen a good framework of a method of working toward a resolution, but the details are still really sketchy," said Michael O'Neill, vice-president of FX Trading at RJOFX Canada.
A challenging Italian bond auction highlighted investor skepticism about the euro zone deal, which included private banks and insurers accepting 50 percent losses on their Greek debt holdings; a leveraging of the euro zone bailout fund; and a recapitalization of banks.
The yield on new 10-year Italian government debt hit a euro lifetime high.
"The (euro zone) agreement didn't have a lot of details but it had everything that the market was looking for," said Mark Chandler, head of fixed income and currency strategy at RBC Capital Markets.
"There was no fresh news to keep things going and the normal sort of doubts are starting to arise today."
The latest economic data also failed to inspire much direction. Sluggish income growth led U.S. households to cut back on saving in September, though consumer sentiment perked up a bit in October.
The Canadian dollar ended at C$0.9919 versus the greenback, or $1.0082, down slightly from Thursday's North American session close at C$0.9913 to the U.S. dollar, or $1.0088. The currency ended the week 1.7 percent higher.
Market players noted that some profit-taking in the Canadian dollar on Friday was offset by U.S.-dollar-negative portfolio rebalancing as the end of the month approaches.
"I still think that that global growth concerns are going to emerge heading toward the end of the year and into 2012, and if growth concerns are out there, the Canadian dollar will weaken off," said John Curran, senior vice-president at CanadianForex.
Looking to next week, the calendar is full of risks in the form of key central bank meetings, corporate earnings reports and economic data that will have to compete with a Group of Seven summit at the end of the week in the southern French resort town of Cannes.
Highlights in Canada are August gross domestic product and October employment figures.
Canadian government bond prices rose across the curve, tracking U.S. Treasuries higher as lower prices and the highest yields in more than 2-1/2 months drew buyers. <US/>
The two-year bond was up 12 Canadian cents to yield 1.084 percent, while the 10-year bond gained 60 Canadian cents to yield 2.424 percent.
Reporting by Claire Sibonney; editing by Rob Wilson