CANADA FX DEBT-C$ weakens with 2014 expected to bring more pressure

* Canadian dollar at C$1.0673 or 93.69 U.S. cents
    * Bond prices higher across the maturity curve

    By Leah Schnurr
    TORONTO, Jan 2 (Reuters) - The Canadian dollar softened
against the greenback on Thursday as oil prices fell, kicking
off a new year that is expected to bring more weakness for the
    With some investors still on holiday, trading was choppy in
thinner-than-usual markets. Earlier in the day, the loonie
strengthened to as much as C$1.0589 against the U.S. currency
before giving up its gains.
    The Canadian dollar enters 2014 with many investors
expecting the currency to weaken in the first few months of the
year as the Bank of Canada maintains a more dovish policy stance
and as the Federal Reserve gradually winds down its U.S.
economic stimulus program. 
    "As we get back to the data and Fed watching, discussions
around tapering will come back to the forefront and the Canadian
dollar may again get pushed lower as focus shifts to  better
U.S. economic performance and the retraction from quantitative
easing," said Don Mikolich, executive director of foreign
exchange sales at CIBC World Markets in Toronto.
    The Canadian dollar ended the North American
session at C$1.0673 to the greenback, or 93.69 U.S. cents. The
U.S. dollar was up 0.7 percent against a basket of
    The Bank of Canada's official close for the Canadian
currency on Tuesday, ahead of Wednesday's New Year's Day
holiday, was C$1.0636, or 94.02 U.S. cents.
    U.S. crude prices settled down $2.98 at $95.44 a
barrel as Libya prepared to restart a major oilfield. 
    Over the last 10 years, the Canadian dollar has ended
January softer than where it started eight times, with an
average loss of 0.6 percent, said Camilla Sutton, chief currency
strategist at Scotiabank in Toronto.
    "A fairly clear seasonal pattern for January," Sutton said.
"Certainly this year that would be in line with where our
forecasts are."
    Sutton expects the Canadian dollar to weaken over the next
six months before stabilizing in the second half of the year as
a stronger U.S. economic recovery benefits Canada. A weaker
loonie should also aid the Canadian economy.
    Data showed global manufacturing ended 2013 on a strong
note, though China's growth remained modest. At home, growth in
Canada's manufacturing sector pulled back to a fourth-month low
last month.  
    Canadian government bond prices were higher across the
maturity curve, with the two-year up 1-1/2 Canadian
cents to yield 1.127 percent and the benchmark 10-year
 up 28 Canadian cent to yield 2.738 percent.