The Canadian dollar gave back a bit of Thursday's startling gain against the US dollar on Friday but stayed in a holding pattern above 79 US cents, buoyed by reluctance to make moves as the G7 finance ministers meeting was getting under way in Washington.
Canadian bond prices followed US treasuries in the retreat they've been on for much of the week as the market abandoned its bet that the US economy would weaken enough to prompt a slowdown in US Federal Reserve rate increases.
The Canadian dollar closed at C$1.2624 to the US dollar, or 79.21 US cents, down from C$1.2616, or 79.26 US cents, at Thursday's close.
The currency leaped to its highest level since May 1993 on Thursday on worries that the Group of Seven meeting on Friday and Saturday would try to undermine the greenback's strength in an effort to narrow the yawning US trade deficit.
"Traders really got the taste of the (US dollar) bear yesterday and while everyone was expecting the market might reverse itself, all of a sudden they got some big (US dollar) sellers," said David Ebata, managing Canadian markets analyst at Thomson IFR.
"The market really couldn't do anything today in terms of selling Canada, and I think the fear is that if we're closing down at these levels, 11-year lows (for the US dollar) or whatever, then the market isn't really done yet."
The Canadian dollar has risen about 2.5 percent over the past two weeks on strong prices for commodities and prospects for rising domestic interest dates.
It has climbed nearly every day despite predictions it is due for a correction. Not even a mildly disappointing July GDP report on Thursday could interrupt its momentum.
"I think a lot is going to depend on weekend developments at the G7," Ebata said.
"There's a lot of concern about the (Chinese) yuan because if they revalue the yuan, obviously that will shake out some US dollars."
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