TORONTO: The Canadian dollar strengthened slightly against its US counterpart on Monday as the greenback lost a little ground after big gains at the end of last week, but a sharp drop in Canadian housing starts kept the loonie's advance in check.
The seasonally adjusted house-building metric fell short of expectations, a move that may have been aggravated by severe winter weather. Analysts have been watching Canada's expensive housing market for signs of a correction after years of strong gains raised the specter of a bubble.
But focus on the US dollar offset the housing concern. The greenback retraced some of the gains it made last week after US employment data came in stronger than expected, and analysts said the overall story remained one of US dollar strength.
"It's been a little bit of a choppy day, most drivers have been relatively flat or negative. We had negative data on the housing side, oil prices have been pretty flat all day, so the bigger, broader story is the US dollar story," said Camilla Sutton, chief currency strategist at Scotiabank.
"There was significant strengthening in the US dollar last week on the back of nonfarm payrolls and we've just seen a little retracement from the lows. But it is still an environment of broad US dollar strength ... and we're likely to see a weakening of the Canadian dollar (in the next few sessions)."
The Canadian dollar ended the North American session at C$1.2596 to the greenback, or 79.39 US cents, slightly stronger than Friday's close of C$1.2610, or 79.30 US cents.
Sutton said the next big driver for the Canadian dollar would likely be domestic employment data for February, due out on Friday.
While the jobs report is a lagging indicator of economic strength, Sutton said it may offer the first good look at the impact lower oil prices have had on employment, and, ultimately, the overall economy.
Canadian government bond prices were higher across the maturity curve, with the two-year up 4.5 Canadian cents to yield 0.602 percent and the benchmark 10-year up 34 Canadian cents to yield 1.577 percent.
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