Canadian dollar drops after housing data, bonds up

Thu May 8, 2008 4:51pm EDT
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By Lynne Olver

TORONTO (Reuters) - The Canadian dollar dropped against the U.S. dollar on Thursday after data showed Canadian housing starts fell 12 percent in April, and market players were reluctant to take big positions ahead of a key employment report due on Friday.

Canadian bond prices rose in tandem with a lift in the U.S. Treasuries market.

The Canadian currency closed at C$1.0171 to the U.S. dollar, or 98.32 U.S. cents, down from C$1.0070 to the U.S. dollar, or 99.30 U.S. cents, at Wednesday's close.

Data from the Canada Mortgage and Housing Corp. showed that construction of new homes slowed more than expected in April, and the previous month's number was also revised lower.

The annualized rate of housing starts in Canada was 213,900 units in April on a seasonally adjusted basis, versus estimates for 225,5000 units. The March figure was cut to 243,000 units from the 254,700 units first reported.

Economists noted that the slowdown in housing starts followed sharp gains early in the year, and does not indicate that the Canadian housing market is falling apart.

"Even with the decline, the level of starts is still fairly robust," Merrill Lynch Canada economist David Wolf said in a research note.

The commodity-linked Canadian dollar is normally buoyed by high oil prices, which hit a record high above $124 a barrel on Thursday. But the impact of oil prices on the currency has waned in recent days, as concerns grow that high crude prices could crimp global economic growth.   Continued...