Canadian dollar weakens

The Canadian dollar weakened against the greenback on Friday, pulling back from a one-month high and bringing this week's rally to a halt as some of the benefit it had seen from investor repositioning faded and offset strong domestic economic data. Still, the loonie gained 0.6 percent for the week, partly fuelled by a sharp jump on Wednesday.
A number of factors drove the loonie higher in recent sessions, including fund flow speculation stemming from Burger King's plans to buy Tim Hortons and asset reallocation at the end of the month. The market had also been readying for the possibility that Friday's economic data could come in stronger than expected and the gross domestic product report delivered, coming in with a 3.1 percent annualised rate of growth, above expectations for 2.7 percent.
Despite touching a session high at C$1.0810, the loonie lost steam through the session as the greenback fared better. "I think it's just part of that month-end rebalancing pressure has been relieved from the US dollar," said Ken Wills, currency strategist and broker at CanadianForex in Toronto. "My expectation is we could very well see it gain back some strength against Canada heading into next week."
The Canadian dollar ended the North American session at C$1.0873 to the greenback, or 91.97 US cents, weaker than Thursday's close of C$1.0847, or 92.19 US cents. Analysts expect the loonie will lose some of the gains it has seen, with the currency likely to suffer from greenback strength as the US economy continues to improve. The US dollar-Canadian dollar pairing's session low around the 55-day moving average held as technical support, said Wills. "I wouldn't be surprised if we're back challenging C$1.0880 and then C$1.0920 above that" next week, he said.
The focus next week will be on the Bank of Canada's monetary policy statement scheduled for Wednesday. The central bank is expected to leave rates at 1 percent until the third quarter of next year and is seen sticking to its cautious tone next week. Investors will also get August's employment report at the end of the week. The pace of jobs growth is expected to remain lackluster, with the economy forecast to have added 10,000 jobs. Canadian government bond yields were mixed, though the yield on the benchmark 10-year slipped to a new nearly 1-1/2-year low at 1.997 percent. The two-year was down 1 Canadian cent in price to yield 1.106 percent.