The Canadian dollar weakened against its U.S. counterpart on Tuesday, but the move was modest ahead of the Christmas Day holiday and as investors awaited clarity on the position of Canadian Prime Minister Justin Trudeau.

The outperforming U.S. economy, which is pushing U.S. yields higher — well above yields in Canada — is attracting more investments south of the border. There’s also a widening differential in monetary policy between the Bank of Canada and the U.S. Federal Reserve, Schamotta said.

The Canadian dollar CADUSD +0.52% weakened to nearly a five-year low against its U.S. counterpart on Tuesday, hurt by domestic political unrest as well as a wider gap between Canadian and U.S. bond yields after data showed a surprise easing of Canadian inflation.

The Canadian dollar weakened against the greenback on Monday, and the yield on benchmark government debt climbed. The loonie was trading 0.4% lower at C$1.443 to the greenback, or 69.3 U.S. cents, after trading in a range of 1.