TORONTO: The Canadian dollar softened against the US dollar on Tuesday as a stronger greenback, bolstered in part by supportive housing-related data, offset a moderate rise in US crude prices, but overall trading was extremely range-bound.
US housing starts fell last month after a hefty increase the prior month, but a surge in permits for future construction to a near eight-year high signaled underlying strength in the market, which has seen home prices and sales rising.
The data comes as Federal Reserve officials gather for a two-day policy meeting. Investors have been shifting their focus toward the Fed and how it views the latest round of economic data. The central bank is widely expected to resume raising interest rates sometime this year, but markets are looking for clues on whether it will come sooner or later.
At 9:26 a.m. EDT (1326 GMT), the Canadian dollar was trading at C$1.2331 to the greenback, or 81.10 US cents, softer than the Bank of Canada's official close of C$1.2317, or 81.19 US cents.
The currency traded within a very narrow range. Its strongest level of the session was C$1.2312, while its weakest level was C$1.2347.
US housing data showed groundbreaking dropped 11.1 percent to a seasonally adjusted annual pace of 1.04 million units, while permits for future home building increased 11.8 percent to a 1.28 million-unit rate, the highest since August 2007.
Domestically, foreign investors bought Canadian securities for the fourth straight month in April, snapping up C$12.94 billion to set a new record for the opening four months of a year.
Canadian wholesale trade data for April is due at 8:30 a.m. EDT on Wednesday, followed by the Fed's rate decision at 2:00 p.m.
US crude oil prices edged up, supported by warnings that a tropical storm threatened to hit the coast of the oil-producing state of Texas, but oversupply weighed on Brent. US crude was up 0.25 percent to $59.67, while Brent crude lost 0.13 percent to $63.87.
The Canadian dollar is expected to trade between C$1.2285 and C$1.2360 against the US dollar on Tuesday, according to National Bank Financial.
Canadian government bond prices were higher across the maturity curve, with the two-year price up 1 Canadian cent to yield 0.618 percent and the benchmark 10-year rising 20 Canadian cents to yield 1.745 percent.
The Canada-US two-year bond spread was -7.6 basis points, while the 10-year spread was -58.9 basis points.
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