The loonie was down 0.3 of a cent to 102.97 cents US after the U.S. central bank said it will spend $40 billion a month on a new round of bond purchases and will continue to do so until the job market shows substantial improvement.
The money will be spent on mortgage backed securities to keep interest rates low, encourage lending and support the slow recovery of the housing sector.
The loonie had been up more than half a cent earlier Friday morning but moved lower amid soft manufacturing data while traders took some profits from a substantial gain.
The loonie surged more than two cents over the past seven sessions as the European Central Bank announced a plan to purchase government bonds in order to keep eurozone borrowing costs under control and speculation mounted the Fed would act to support a slowing economy.
"Central bank policy, namely by the ECB and Fed, have put significant downward pressure on the U.S. dollar," said Scotia Capital chief currency strategist Camilla Sutton.
"The looming threat of (further stimulus moves), without substantial improvement in the labour force, is likely to put additional downward pressure on the U.S. dollar and has made employment releases a key component of USD valuation."
On the economic front, there was data showing slowing Canadian manufacturing shipments and U.S. retail sales.
Statistics Canada said that manufacturing sales fell 1.5 per cent to $48.3 billion in July, the third decrease in five months. The agency said that declines in transportation equipment were largely responsible for the overall drop.
And in the U.S., the Commerce Department said retail sales increased a seasonally adjusted 0.9 per cent. Gas station sales jumped 5.5 per cent, the most in nearly three years and a reflection of sharp price increases. Demand for autos increased 1.7 per cent.
Outside those categories, sales rose only 0.1 per cent.
Commodities were higher as the Fed program raised demand prospects for oil and metals.
Geopolitical worries also drove oil prices higher as a wave of anti-American protests in the Mideast raised supply concerns.
Protesters stormed the U.S. Embassy compound in Yemen’s capital Thursday. Ongoing clashes have been taking place around the U.S. mission in Cairo, and the U.S. ambassador to Libya was killed Tuesday.
The October crude contract on the New York Mercantile Exchange gained 69 cents to US$99.
The rally in copper prices continued with the December contract up 12 cents to US$3.83 a pound. Copper, viewed as an economic barometer because it is used in so many industries, has surged 19 cents this past week.
Bullion gained 60 cents to US$1,772.70 an ounce following a jump of almost $40 on Thursday as the Fed program raised inflation concerns.