The TSX and Dow Jones both began the new year on positive ground, though the Canadian dollar dipped to 85.49 cents U.S.

The Canadian dollar lost some of its shine Friday amid a strengthening U.S. greenback and falling commodity prices, particularly oil.

The loonie fell 0.91 of a cent to 85.29 cents U.S. by mid-day Friday on the first trading day of 2015.

The currency had finished off 2014 about eight per cent lower, falling 7.8 cents U.S. In contrast, the American dollar had strengthened last year as the U.S. Federal Reserve wrapped up its massive program of buying bonds and mortgage-backed securities that kept long-term interest rates low.

Its expected the Fed will move to hike rates for the first time since the 2008 financial crisis in mid-2015. Expectations are the Bank of Canada will also move to hike rates sometime after that.

The Institute for Supply Management, a trade group of purchasing managers, reported that U.S. factory activity grew at the slowest pace in six months in December, weakened by declines in orders and production.

Its manufacturing index fell to 55.5 in December from 58.7 in November. Any reading above 50 signals expansion. Despite the slowdown, a measure of employment rose, suggesting factories likely added jobs last month.

Oil prices are flirting with their lows and remain an important weight on (the Canadian dollar), observed Camilla Scott, chief FX strategist at Global Banking and Markets at Scotiabank.

The February crude oil contract in New York gained 15 cents to US$53.42 a barrel.

Crude prices have been on a downward trajectory since hitting a recent high of US$107 a barrel in June and have plunged more than 50 per cent since then due to low demand and a global supply glut.

Earlier this week, prices failed to respond to data showing a sharper than expected drawdown of U.S. crude oil inventories last week. The Energy Information Administration reported that inventories declined by 1.8 million barrels to 385.5 million barrels. Analysts had expected a decline of 1.25 million barrels for the week.

Paul Vaillancourt of Fiera Capital said the loonies performance is tied to crude prices but he projects both will rise in 2015.

Theres a clearly link between our currency and the price of oil, and what investors think will happen to the Canadian economy, he said.

Our view is short term pain for long term gain. (The loonie) will be hard hit in the short term, impacted with the price of oil, but both the Canadian dollar and price of oil will revert back and well see the Canadian dollar back to 90 cents US by the end of the year.

Elsewhere on the commodity markets, February gold gained $5.50 to US$1,189.60 an ounce while March copper lost two cents at US$2.81 a pound.