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.
The Bank of Canada's official closing rate for the currency on Tuesday was C$1.0636 to the greenback, or 94.02 U.S. cents, slightly stronger than Monday's close of C$1.0640, or 93.98 U.S. cents.
It was the worst year for the Canadian currency since the global financial crisis in 2008, with the greenback appreciating by more than 7 percent against the loonie, according to Thomson Reuters data.
"I would anticipate that next year, as the markets come back in and load into the preferred trades, that long U.S. dollar-Canada is going to be one of them," said Greg Anderson, global head of foreign exchange strategy BMO Capital Markets in New York.
Anderson sees the Canadian dollar falling below C$1.07 in early January and potentially as far as the C$1.0850 and C$1.09 range "on the back of the Fed doing another round of tapering in late January and the Bank of Canada sitting on their hands."
A Reuters poll in early December found forecasters expected the Canadian dollar to weaken to C$1.08 in the coming 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 27 Canadian cents to yield 2.774 percent.
The bond market closed early ahead of Wednesday's holiday.
Editing by Kenneth Barry