TORONTO: The Canadian dollar firmed against its US counterpart and outperformed other major currencies on Monday after data showed Canadian housing starts came in ahead of expectations in May.
A report from Canada Mortgage and Housing Corp showed seasonally adjusted annualized housing starts rose to 198,324 last month, while April was revised higher to 196,687 units. Analysts had forecast 185,000 for May.
The data suggested housing will contribute to economic growth in the second quarter after an unusually frigid winter put a chill on construction.
"Most of (the Canadian dollar) strength came in tandem with the stronger-than-expected housing starts number which, a combination of that and the slight revision to last month, would suggest that the housing market is providing more of a lift to GDP than anyone expected," said Camilla Sutton, chief currency strategist at Scotiabank.
"We are trading up as well as Aussie, which suggests it's somewhat of a global growth, positive move, and that's just the ongoing theme of the day."
The Canadian dollar closed at C$1.0908 to the greenback, or 91.68 US cents, up from Friday's close of C$1.0930, or 91.49 US cents.
Trading this week may be uneventful, with the Bank of Canada's semi-annual Financial System Review on Thursday and a press conference by Governor Stephen Poloz following the release of the review being the highlights.
"This is going to be a quiet week overall for every market, currency markets as well, after pretty solid action last week," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO capital Markets.
Reitzes noted that if yields, particularly US Treasury yields, continue to rise, it could weigh on the Canadian dollar as higher US yields attract flow to the greenback.
Canadian government bond prices were lower across the maturity curve, with the two-year down 1.5 Canadian cents to yield 1.070 percent, and the benchmark 10-year off 3 Canadian cents to yield 2.325 percent.
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