The S&P/TSX composite slipped 2.85 points to 15,200.76, while the loonie fell 0.62 of a U.S. cent to 81.29 cents.
"The market started the day off weakly," partly as a result of issues abroad, said Roland Chalupka, chief investment officer at Fiduciary Trust Canada, an arm of Franklin Templeton Investments Corp.
Chalupka said negotiations between European leaders over Greece's debt troubles were somewhat to blame for the disappointing start to the day.
But markets drifted slightly higher following relatively positive comments on the economy in the afternoon from Federal Reserve chairwoman Janet Yellen, Chalupka said.
"At the end of the day here we are — the market is little changed on a light volume a day ahead of the Memorial Day weekend," Chalupka said.
In New York, the Dow Jones industrial average was down 53.72 points at 18,232.02, while the Nasdaq edged 1.43 points lower to 5,089.36 and the S&P 500 gave back 4.76 points to 2,126.06.
In her speech, Yellen said she expects the Fed to begin raising interest rates later this year if the job market improves and the U.S. central bank is confident that inflation will rise closer to its target rate.
"Her comments on the U.S. economy were better than expected and that gave a little bit more confidence," Chalupka said.
Yellen cautioned that the economy is still facing a number of headwinds that could stall growth, including disappointing wage growth, a tepid housing recovery and global economic weakness.
But because the Fed's interest rate moves take time to filter through the economy, she said further improvements in the economy will likely make it prudent to start raising rates later this year.
In other economic news, Statistics Canada reported the annual inflation rate slowed to just 0.8 per cent last month, its weakest reading since October 2013, with lower energy prices a major factor.
In the U.S., consumer prices rose slightly in April for the third straight month, suggesting that an improving economy could be setting the stage for the Federal Reserve to raise the benchmark short-term interest rate from the near-zero level where it has been for more than six years.
U.S. consumer prices edged up 0.1 per cent from the previous month but core inflation, which excludes volatile food and energy prices, climbed 0.3 per cent for the biggest gain in 15 months.
Energy stocks dropped 0.16 per cent on the TSX as the July crude contract slipped $1 to US$59.72 a barrel.
Chalupka said investors who had benefited from the recent rally in crude prices were looking to cash in profits.
Meanwhile, the June gold contract fell 10 cents to US$1,204.00 an ounce.
Follow @alexposadzki on TwitterSuggest a correction