OTTAWA: The Canadian dollar firmed slightly against the greenback on Tuesday and was expected to hew to a tight trading range in subdued holiday volume as the loonie was set to close out its worst year since 2008.
Jitters over the future of Greece's bailout program as the country heads to an early election next month sapped investors' appetite for risk, sending the US dollar lower to the benefit of the loonie.
"Overall, the loonie is following the broader trend in the US dollar," said Martin Schwerdtfeger, FX strategist at TD Securities in Toronto.
"Even if the broader view is that the US dollar-Canadian dollar should be going higher, at this point nobody is willing to extend US dollar longs."
The Canadian dollar was at C$1.1625 to the greenback, or 86.02 US cents, slightly stronger than Monday's close of C$1.1629, or 85.99 US cents.
The morning's gains were even smaller relative to the 8.5 percent drop the Canadian dollar has seen this year. With only two trading days left in 2014, the loonie was on track to see its worst year in six years.
Analysts expect the Canadian dollar will continue to lose ground in 2015, with monetary policy in Canada and the United States likely to converge. The weak price of oil, which is a major export for Canada, is also seen weighing on the currency.
Schwerdtfeger expects to see the loonie hit C$1.18 or C$1.19 to the US dollar by the middle of next year.
"On-going weakness for crude oil will mean even further downward pressure for the Canadian dollar and that is still not fully reflected in the price," he said.
Canadian government bond prices were higher across the maturity curve, with the two-year up 3-1/2 Canadian cents to yield 1.016 percent and the benchmark 10-year up 18 Canadian cents to yield 1.812 percent.
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