The loonie was trading nearly unchanged at 1.2797 to the greenback, or 78.14 U.S. cents, having rebounded from its weakest intraday level since Dec. 23 at 1.2881.
The currency benefited from a recovery in risk appetite, said Karl Schamotta, chief market strategist at Cambridge Global Payments.
"Risk appetite returned across asset classes this morning as it became clear that the GameStop phenomenon does not represent a systemic risk to the financial system," Schamotta said.
Some online brokerages restricted trading in GameStop and stocks of several other social-media darlings that had soared this week, while U.S. stocks rebounded from sharp losses in the prior session as fears eased around hedge funds selling long positions to cover shorts.
"The episode has provided a useful illustration of the vulnerabilities that are building in the background as governments and central banks flood markets with money and truncate financial volatility," said Schamotta.
The unprecedented liquidity injected into the financial system from the Bank of Canada's bond purchases has pushed some money market rates below the central bank's targeted interest rate, and analysts say the pressure will persist until the quantitative easing program is scaled back.
The price of oil, one of Canada's major exports, eased as the market focused on delays to vaccine rollouts and fresh travel curbs that could depress demand.
U.S. crude oil futures settled nearly 1% lower at $52.34 a barrel, while Canadian government bond yields were higher across much of a steeper curve in tandem with U.S. Treasuries. The 10-year rose 2.9 basis points to 0.823%.
(Reporting by Fergal Smith; Editing by Steve Orlofsky and Peter Cooney)
By Fergal Smith
