CANADA FX DEBT-C$ weakens as more pressure seen in 2014
* Canadian dollar at C$1.0704 or 93.42 U.S. cents * Bond prices lower across the maturity curve By Leah Schnurr TORONTO, Dec 27 (Reuters) - The Canadian dollar weakened against the greenback on Friday in a choppy post-holiday session as investors were expecting the loonie to face further pressure heading into the new year. The loonie was also lower against other major currencies. Against the euro, the Canadian dollar hit a nearly four-year low at C$1.4816 as the euro was pushed higher by banks shoring up their balance sheets. With no Canadian economic data on tap until the new year and the U.S. calendar similarly sparse, investors focused on the longer-term trends for the loonie, said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. "The path of least resistance for the loonie is still lower," Smith said. The Canadian dollar has been bruised in recent months by a more neutral policy stance from the Bank of Canada that has markets expecting interest rates will stay low for longer. Meanwhile, the U.S. Federal Reserve has begun reducing its economic stimulus, which should benefit the U.S. dollar. "That divergence is going to work in the U.S. dollar's favor to the detriment of the loonie as we move into 2014," Smith said. The Canadian dollar ended the North American session at C$1.0704 to the greenback, or 93.42 U.S. cents, weaker than Thursday's close of C$1.0649, or 93.91 U.S. cents, according to Reuters data. While the next couple of trading sessions could be choppy due to month- and year-end portfolio rebalancing, the loonie is likely to weaken further in the first half of 2014 before regaining some strength in the later part of next year, Smith said. The Canadian dollar fell below C$1.07 for the first time in a week, a level analysts see as a key support area. The lighter liquidity with some investors still away for the holidays can exaggerate moves. "As is often the case in thinner markets, a few trades that go through of any size can push things around in a certain direction," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. Investors also had their eyes on U.S. benchmark Treasury debt as yields rose above 3.0 percent on the 10 year note to their highest level in more than two years, which should increase the attractiveness of the greenback. "If you start to see long-rates creeping up, that will be U.S. dollar positive, but at the same time ... there is a recognition that good U.S. economic performance will be Canada positive," said Mikolich. Canadian government bond prices were lower across the maturity curve, with the two-year down 3 Canadian cents to yield 1.153 percent and the benchmark 10-year down 53 Canadian cents to yield 2.786 percent. Canadian bond and equity markets were closed on Wednesday and Thursday for the Christmas and Boxing Day holidays.
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