Photo: The Canadian Press. All rights reserved.

A worker at the Royal Canadian Mint checks the quality of loonies on May 2, 2006. THE CANADIAN PRESS/AP, Marianne Helm

The Canadian dollar closed higher Friday at the end of a punishing week of losses amid data that showed the economy performed as expected late last year.

The loonie gained 0.4 of a cent to 97.36 cents US as Statistics Canada reported that gross domestic product grew at an annualized rate of 0.6 per cent in the fourth quarter, which matched expectations. However, GDP actually shrank in the final month of the year, dropping 0.2 per cent, which was also in line with economists' forecasts.

The dollar tumbled about three US cents during February, down 0.6 of a cent just this week, to fresh eight-month lows, in part after the U.S. currency gained ground in the wake of Italian elections last Sunday and Monday which failed to yield a clear-cut winner.

But the dollar was also punished by weak Canadian trade data.

The currency had been lower earlier in the morning as the greenback strengthened while markets considered the effects of the sequestration deadline kicking in. That's the name for automatic across the board series of government spending cuts totalling US$85 billion.