The Canadian dollar rallied into the end of 2011, albeit in holiday-thinned volume, heralding what many analysts believe will be a better year for the economic growth-sensitive currency in 2012. Canada was a mediocre performer among G10 currencies in 2011, down 2.2 percent after a roller-coaster second half of the year during which trade was driven by headline risk out of Europe. In 2010, the Canadian dollar had a 5.7 percent gain against the greenback.
The lacklustre performance by the Canadian dollar in 2011 - as well as a slumping Canadian equity market - reflected slowing global economic growth, which spurred spikes in risk aversion and volatility in commodity prices. A stronger-than-expected US economic outlook and US oil prices holding in around $100 should also support Canada, especially with market volatility dropping off from autumn highs.
The Canadian dollar closed Friday's North American session at C$1.0170 versus the greenback, or 98.33 US cents, up from Thursday's finish of C$1.0208, or 97.96 US cents. Volume this week has been very light, with many traders off for the Christmas and New Year's holidays, causing market players to be sceptical of the importance of any sharp moves. Canadian financial markets are closed on Monday.