TORONTO – The Canadian dollar closed slightly below parity with the American dollar Thursday as nervousness about the consequences of a looming budget crisis in Washington again sent traders to the perceived safe haven of U.S. Treasuries.
The loonie was off 0.43 of a cent to 99.96 cents US, after falling almost half a US cent Wednesday.
If a budget deal isn’t reached by U.S. leaders by the end of December, tax increases and government spending cuts to the tune of US$600 billion automatically take effect in what is being called a fiscal cliff.
The worry is that would result in the United States sliding back into recession, dragging down other economies, including Canada’s.
On Thursday, traders took in data showing a softer than expected reading on housing starts in Canada in October. Canada Mortgage and Housing Corp. reported starts came in at an annualized rate of 204,100 units against expectations of 210,000.
“Despite low rates and surprisingly resilient investor demand, housing construction looks to be struggling to attain new heights in recent months,” observed CIBC World Markets economist Emanuella Enenajor.
“Although the housing starts data tend to be volatile month to month, we expect to see a trend in softening starts through 2013 as a slowdown in secondary market activity weighs on home building.”
Other data showed that Canada’s trade performance beat expectations in September with a smaller than expected deficit of $826 million, much better than the downwardly revised $1.5 billion deficit from August. Performance was aided by a 1.9 per cent uptick in exports.
Commodity prices were mainly higher following steep losses on Wednesday. December crude gained 65 cents to US$85.09 a barrel after demand concerns, higher inventories and the rising American dollar combined to send prices skidding more than $4.
December copper added three cents to US$3.47 a pound after falling seven cents while December gold bullion climbed $12 to US$1,726 following a $1 dip Wednesday.