TORONTO: The Canadian dollar weakened against the greenback on Friday in what could be a choppy post-holiday session as investors expected the loonie to face more pressure heading into the new year.
The loonie was also lower against most other major currencies. Against the euro, the Canadian dollar hit a nearly four-year low at C$1.4816 as the euro was pushed higher by banks shoring up their balance sheets.
With no Canadian economic data on tap until the new year and the US calendar similarly sparse, investors focused on the longer-term trends for the loonie, said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary.
"The path of least resistance for the loonie is still lower," Smith said.
The Canadian dollar has been bruised in recent months by a more neutral policy stance from the Bank of Canada that has markets expecting interest rates will stay low for longer.
Meanwhile, the US Federal Reserve has begun reducing its economic stimulus, which should benefit the US dollar.
"That divergence is going to work in the US dollar's favor to the detriment of the loonie as we move into 2014," Smith said.
The Canadian dollar was at C$1.0668 to the greenback, or 93.74 US cents, weaker than Thursday's North American close of C$1.0649, or 93.91 US cents, according to Reuters data.
A move in US benchmark Treasury yields to over 3 percent also added some appeal to the greenback, said Smith.
While the next couple sessions could be choppy due to month- and year-end portfolio rebalancing, the loonie is likely to weaken further in the first half of 2014 before regaining some strength in the later part of next year, Smith said.
Canadian government bond prices were lower across the maturity curve, with the two-year down 3 Canadian cents to yield 1.153 percent and the benchmark 10-year down 39 Canadian cents to yield 2.767 percent.
Canadian bond and equity markets were closed on Wednesday and Thursday for the Christmas and Boxing Day holidays.
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