TORONTO – The Canadian dollar climbed Tuesday as the threat of U.S. military action diminished following news that Syria has agreed to a proposal to dismantle its chemical weapons.
The loonie was ahead 0.24 of a cent to 96.64 cents US.
Early Tuesday, Syrian Foreign Minister Walid al-Moallem said his government would accept Russia’s proposal to hand its chemical weapons over to international control.
The development followed weeks of tension after the U.S. threatened military action against Syria for an alleged sarin gas attack Aug. 21 in a suburb of Damascus that killed 1,429 people.
President Barack Obama cautiously welcomed the development, but said he will still ask the U.S. Congress to approve military strikes in case Syria does not honour its promise.
The loonie also lifted after a second day of positive economic news from China.
Overnight, the world’s second-largest economy reported industrial production was 10.4 per cent higher in August than the year before, ahead of analyst forecasts of a 9.9 per cent increase.
“A month or two ago, people were getting quite concerned about China and the rate of acceleration of the economy,” said Norman Raschkowan, a North American strategist with Mackenzie Financial Corp. “(But) the latest shows that there is some stabilization.”
Despite the strong Chinese data, commodity prices were lower. December gold bullion fell $22.70 to US$1,364 an ounce, while December copper took back two cents to US$3.26 a pound.
The October crude contract fell $2.13 to US$107.39 a barrel.
“What has really impressed today is that the Canadian dollar is up despite the softness in oil and gold prices,” said Raschkowan.
“I think it’s (a sign) that generally things are going well and if you can take the Syrian situation out of the equation… it means people are paying more attention to the other positive news.”
Raschkowan says much of the loonie’s strength may have to do with a weakening U.S. dollar, as markets south of the border await an announcement next week from the U.S. Federal Reserve on quantitative easing. It’s anticipated that the central bank may decide to roll back its $85-billion of monthly bond purchases, which has pumped easy money into the markets.
Meanwhile, in Canadian economic news, the Canada Mortgage and Housing Corp. says the pace of housing starts was down in August compared with the previous month.
The monthly seasonally adjusted rate fell to 180,291 units last month, down from 193,021 in July.
The Ottawa-based federal agency says housing starts in urban areas fell by 5.8 per cent from July’s level, mostly because of fewer multiple-unit projects such as condos or apartments.