Loonie up amid strong housing starts data, traders look to Fed chair remarks

TORONTO – The Canadian dollar was higher Thursday amid a stronger than expected reading on the housing sector.

The currency gained 0.19 of a cent to 91.98 cents US as Canada Mortgage and Housing Corp. reported that housing starts came in at an annualized rate of 195,000 in April, higher than the 175,000 that economists had expected.

The American dollar was generally weaker as traders awaited a second day of congressional testimony from Federal Reserve chair Janet Yellen.

On Wednesday, Yellen told lawmakers that the U.S. job market is “far from satisfactory.” She said the Fed will begin increasing interest rates only when there is enough progress in restoring full employment and when inflation is back up to its target of two per cent.

Yellen’s comments appeared to ease concerns that the Fed might move too quickly to raise interest rates.

Investors were also encouraged Thursday by China’s April trade data that showed an improvement in exports. Exports rose 0.9 per cent from the previous year, compared with a 6.6 per cent decline in March. Imports also grew after a contraction in March but at a subdued level.

Tensions arising from the Ukraine crisis eased a bit after Russian President Vladimir Putin softened his tone. Putin endorsed plans for fresh elections in Ukraine following the ouster earlier this year of its pro-Russian leader and called on pro-Russian militants in eastern Ukraine to delay referendums on autonomy.

Meanwhile, the European Central Bank has left its benchmark interest rate unchanged at a record low of 0.25 per cent amid growing signs that the economic recovery in the 18-country eurozone is gaining momentum.

A rate cut could give growth a small boost in theory by lowering borrowing costs for banks and companies. It could also help lower the euro, which is near a 2 1/2-year high against the U.S. dollar at around $1.395. A weaker euro would help exporters and boost inflation, which at an annual 0.7 per cent is well under the bank’s two per cent goal.

On the commodity markets, June crude in New York was 28 cents higher to US$100.49 a barrel.

July copper edged up a cent to US$3.05 a pound while June bullion gained $3.80 to US$1,292.70 an ounce.