CANADA FX DEBT-C$ firms, but set for weakest year since 2008
* Canadian dollar at C$1.0627 or 94.10 U.S. cents * Bond prices lower across the maturity curve By Leah Schnurr TORONTO, Dec 31 (Reuters) - The Canadian dollar firmed against the greenback on Tuesday, even as it was set to close out its weakest year since 2008 with analysts expecting a dovish Bank of Canada will spell more weakness for the currency next year. Trading was expected to be 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, though the report had little impact on the loonie. Investors will also get a look at U.S. consumer confidence later in the morning. 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." The Canadian dollar was at C$1.0627 to the greenback, or 94.10 U.S. cents, stronger than Monday's close of C$1.0640, or 93.98 U.S. cents. The Canadian currency was building on the previous session's momentum in thin trade after Monday's weaker-than-expected U.S. pending home sales took some of the appeal out of the greenback, said Smith. The loonie has lost more than 7 percent this year, according to Thomson Reuters data, its biggest decline since a more than 20 percent plunge in 2008, at the heart of the global financial crisis. 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. The Canadian dollar could trade between C$1.08 and C$1.0850 in the first quarter, though there is some risk the currency could drop to C$1.09 to C$1.10 on an interim basis, said Smith. He sees the loonie firming to the C$1.06 to C$1.05 area in the last six months of next year. Canadian government bond prices were lower across the maturity curve, with the two-year off 1 Canadian cent to yield 1.135 percent and the benchmark 10-year down 20 Canadian cents to yield 2.765 percent.
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