Dollar rises as housing data tops estimates

Wed Jul 9, 2008 9:57am EDT
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By Frank Pingue

TORONTO (Reuters) - The dollar shot to its highest level in nearly a week versus the U.S. dollar on Wednesday after domestic data showed housing starts topped estimates, which helped lift the currency from its overnight low.

Domestic bond prices were pinned lower across the curve and extended losses from Tuesday when Federal Reserve Chairman Ben Bernanke said the bank might extend emergency lending for big Wall St. investment banks.

At 9:35 a.m., the Canadian unit was at C$1.0107 to the U.S. dollar, or 98.94 U.S. cents, up from C$1.0191 to the U.S. dollar, or 98.13 U.S. cents, at Tuesday's close.

Data that showed housing starts fell 4.3 percent in June but still topped the median estimate of analysts while the prior month was upwardly revised, was driving the rally.

"Maybe it's good news that the Canadian housing market isn't keeling over given what's happening in the U.S.," said Eric Lascelles, chief economics and rates strategist at TD Securities.

"But I'm a little bit perplexed at the market reaction to this number because it is a second-tier indicator and didn't have much in the way of shocks."

A rise in oil prices after sliding from last week's record high near $146 a barrel helped lift the Canadian currency from its overnight low.

And with no other domestic data due out on Wednesday, the next item of interest for the Canadian currency could be the weekly U.S. oil inventory data, due at 10:30 a.m. It is expected to show a 1.8 million-barrel decline in crude stocks.   Continued...