Canadian dollar slides to 3-week low on soft data

Wed Jan 9, 2008 5:42pm EST
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By John McCrank

TORONTO (Reuters) - The Canadian dollar ended at a three-week low against a resurgent U.S. currency on Wednesday after a report showed Canadian housing starts for December missed market expectations by a wide margin.

Domestic bond prices, which had been rallying for weeks on fears of a U.S recession and the likelihood of interest rate cuts, fell as investors took profits.

The Canadian dollar closed at 99.03 U.S. cents, valuing a U.S. dollar at C$1.0098, down from 99.56 U.S. cents, or C$1.0044, at Tuesday's close.

Domestic housing starts fell 19.6 percent in December to a seasonally adjusted annualized rate of 187,500. That was down from an upwardly revised 233,300 starts in November, according to Canada Mortgage and Housing Corp.

Analysts polled by Reuters had expected 221,000 starts.

"With weather exerting a negative influence on building activity in December, the sharp drop in housing starts shouldn't be seen as the prelude to a U.S.-style meltdown in the coming year," Robert Hogue, a senior economist at BMO Capital Markets said in a note.

"Nonetheless, the sector's strong momentum of the last several years is expected to slow moderately as rising economic uncertainty throws some sand in the housing engine."

Even with December's sharp drop, CMHC said 2007 was the second strongest year for starts in almost two decades.   Continued...