Canadian dollar flinches after weak housing data

Thu May 8, 2008 9:28am EDT
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar fell versus the U.S. dollar on Thursday after data showed Canadian housing starts fell 12 percent in April, but the currency's move was limited ahead of the key jobs report due on Friday.

Domestic bond prices were mostly flat as dealers sifted through the data and tried to gauge what it all means for the Bank of Canada key overnight rate.

At 9:15 a.m. (1315 GMT), the Canadian unit was at C$1.0127 to the U.S. dollar, or 98.75 U.S. cents, down from C$1.0070 to the U.S. dollar, or 99.30 U.S. cents, at Wednesday's close.

The Canadian currency fell as low as C$1.0144 to the U.S. dollar, or 98.58 U.S. cents, after data from Canada Mortgage and Housing Corp. showed construction of new homes fell short of expectations and included a downward revision to the prior month's figure.

It was trading around C$1.0135, or 98.67 U.S. cents, just before the 8:15 a.m., when the data was released.

But the Canadian dollar reclaimed the bulk of its losses shortly after as the market understood the slowdown followed sharp gains in January and February that were already considered unsustainable.

"I think the realization going into the report is even with the slightly larger falloff, the level of activity is still fairly strong," said Paul Ferley, assistant chief economist at Royal Bank of Canada. "And certainly we're not seeing the kind of collapse in housing activity as is playing out in the U.S."

The report showed the seasonally adjusted annualized rate of housing starts in Canada was 213,900 units in April, which missed estimates for 225,5000 units. The data also included a downward revision to the March figure to 243,000 units from an originally reported 254,700 units.   Continued...