Canada's dollar finished higher for a third straight session on Friday in sparse trade that is expected to stretch through the rest of the year. The Canadian currency moved in a narrow 55-point range during a holiday-shortened North American session. It finished at C$1.0064 to the US dollar or 99.36 US cents.
That is up from Thursday's close of C$1.0089 to the US dollar or 99.12 US cents. For the week, the currency is up 0.6 percent. Traders said that due to the lack of liquidity before Christmas and New Year holidays, the currency was being driven more by flows from orders going through.
"Markets will be thin until the middle part of next week. There should be some calendar year-end flow and repatriation-related activity. The market will pick up in a meaningful way after the new year," said Jack Spitz, managing director of foreign exchange at National Bank Financial.
There was no data due on Friday, and none from Canada until the new year. Some US data, such as Midwest manufacturing for November, some housing statistics and consumer confidence figures, are due next week but are unlikely to push the currency much outside the range of parity to C$1.04 that has become well-established over the past three months.
Once the new year is underway, Canada's dollar is likely to climb, and perhaps hit parity with the US currency, on a supportive backdrop of strong commodity prices as well as expectations the Bank of Canada will resume raising interest rates. Euro zone debt remains one of the key factors to watch next year. But the Canadian dollar might be able to stay somewhat insulated against having that crisis weigh significantly since Canada has little direct exposure to euro zone sovereign debt.
"The focus remains on sovereign risk. That combined with the Bank of Canada hiking rates in the second half, before some of the other major central banks, will widen spreads in Canada's favour," said Camilla Sutton, chief currency strategist at Scotia Capital.
The Canadian dollar's high on Friday was C$1.0050 to the greenback, or 99.50 US cents, its strongest level in a week, as oil hovered around its highest price levels in more than two years, supported by cold weather across the globe and appetite for risk assets. Canadian bond prices were mildly lower, weighed by the fairly positive economic data from the previous session, with little impetus to trade in the shortened session.