TORONTO – The Canadian dollar closed lower Thursday as the U.S. dollar strengthened after the president of the European Central Bank said he would keep a close eye on the economic impact of the rise of the euro.
Traders also digested a worse than expected report from the housing sector and generally weaker commodity prices.
The currency was down 0.25 of a cent to 100.2 cents US.
The euro weakened after Mario Draghi told a press conference that while the recent appreciation of the euro was a sign of rising confidence in the region, he also acknowledged that it could weaken economic growth.
Over recent months, the euro has risen from around the US$1.20 mark to trade over $1.35 even though a number of the 17 European Union countries have sunk back into recession.
The central bank also said Thursday that it is keeping its benchmark rate at a record low 0.75 per cent despite pressure from hard-pressed businesses for a cut. Even though the economy of the 17 European Union countries that use the euro is in recession, there have been positive recent signals from forward-looking surveys, which likely played a large factor in the bank’s decision.
Statistics Canada said that Canadian building permits fell by 11.2 per cent in December. That was much worse than expectations for a 2.5 per cent rise during the month.
“Building permits are now 16 per cent off from year-ago levels, with multi-family residential permits a whopping 41 per cent below the levels seen last December,” said a commentary from CIBC World Markets.
“Today’s figures suggest Canada’s homebuilding sector could be a drag on activity in late 2012/early 2013, and the recent trend in slowing permits bodes poorly for tomorrow’s housing starts reading.”
The March crude contract on the New York Mercantile Exchange dropped 79 cents to US$95.83 a barrel.
March copper dipped a penny to US$3.73 a pound while April bullion faded $7.50 to US$1,671.30 an ounce.
Traders also looked ahead to Friday’s latest employment report.
Statistics Canada is expected to report Friday that the economy created around 5,000 jobs during January. That’s down sharply from the 31,000 reading from December.