USD/CAD loses ground during late US trade on Friday

US dollar weakened against its Canadian counterpart during the late phase of US trade on Friday amid bets that prices of raw materials have plunged to a low.

USD/CAD reached a session low at 1.0602 at 13:15 GMT, after which the pair closed at 1.0636 on Friday, losing 0.31% for the day. Support was likely to be found at January 2nd low, 1.0589, while resistance was to be encountered at Fridays high, 1.0672. USD/CAD appreciated 6.6% in 2013, which has been the most considerable advance since 2008.

“The market was short all the commodity currencies and traders that are in are looking to take out stops in those positions and as a result we’re getting a bit of position trimming,” Greg Anderson, head of global foreign exchange strategy at Bank of Montreal, said by phone from New York, cited by Bloomberg.

Bank of Canada Governor Stephen Poloz has said that a stronger economic growth will rely on boosted exports, as domestic consumer spending weakens.

Crude oil, Canadas largest export, fell to lows unseen in one month at 93.88 at 19:25 GMT on Friday, after which oil futures with delivery in February closed at 94.23, plunging 1.27% for the day. Futures on crude oil dropped 4.4% in the first two trading sessions of the year.

Meanwhile, the Federal Reserve Bank said on December 18th that it plans to reduce its monthly bond purchases in January to $75 billion from $85 billion, while also reinforcing its position that the benchmark interest rate will remain low for an extended period of time. Bank’s policymakers will probably trim asset purchases in increments of $10 billion over the next seven meetings before ending the program in December 2014.

However, Federal Reserve Bank Chairman Bernanke said yesterday that any decision to scale back the 75 billion USD in monthly asset purchases should not be interpreted as a signal that a tighter policy was on the horizon.

“It is important to recognize that the potential signaling aspect of asset purchases depends on the broader economic and policy context. In particular, the Feds decision to modestly reduce the pace of asset purchases at its December meeting did not indicate any diminution of its commitment to maintain a highly accommodative monetary policy for as long as needed”, Chairman Ben Bernanke said in prepared remarks of a statement he took at an economics conference in Philadelphia on Friday.

On Thursday the Department of Labor in the United States reported that the number of people, who filed for unemployment assistance during the week ended December 28th, dropped to 339 000 from the upwardly revised 341 000 in the preceding week. Analysts had projected that the number of initial jobless claims will increase to 342 000.

In addition, according to data by the Institute for Supply Management (ISM), US companies operating in the sector of manufacturing increased their activity at a weaker but still steady rate in December compared to November. The corresponding index, gauging the performance of manufacturing sector in the country, came in at a value of 57.0 in December, down from 57.3 in the previous month, which was also the highest level of the index in 2.5 years. Analysts had forecast that the manufacturing PMI will demonstrate a larger drop in December, to 56.9.

The difference in yields between Canadian and US 10-year government bonds was 24 basis points, or approaching the widest since February 2011.

Elsewhere, the loonie, as Canadian dollar is also known, traded higher against the euro, as EUR/CAD cross closed at 1.4452 on Friday, plunging 0.93% on a daily basis. GBP/CAD pair closed at 1.7462, down 0.54%. The Canadian dollar has risen 0.9% during the past week against nine developed-nation currencies, which are tracked by Bloomberg Correlation-Weighted Indexes.