TORONTO - The Canadian dollar closed little changed Wednesday as the greenback gained ground amid a positive assessment of the U.S. economy.
The commodity sensitive loonie failed to benefit from rising oil prices, dipping 0.01 of a cent to 99.58 cents US after closing below parity Tuesday for the first time since March 6.
The dollar fell about three-quarters of a cent Tuesday as the latest round of worry about the European debt crisis encouraged traders to avoid riskier assets such as the Canadian currency and seek safety in the form of U.S. Treasuries and bullion.
The greenback strengthened mid-afternoon Wednesday in the wake of the U.S. Federal Reserve’s latest survey of business conditions.
The so-called Beige Book said that each of the Fed’s 12 bank districts grew at a modest to moderate pace from mid-February through April 2. And the survey noted that hiring was steady or increased in most of the country.
The U.S. Labour Department last week said hiring slowed in March to half the pace from the previous three months. But the Fed survey, which is anecdotal, didn’t reflect that slowdown.
The loonie had found support earlier in the session as sentiment improved after American resource giant Alcoa Inc. turned in a much better than expected earnings report and an encouraging outlook.
Also, a European Central Bank official reportedly indicated the ECB could resume its bond-purchase program in order to keep yields from rising to unacceptable levels.
On Tuesday, Spain saw its 10-year bond yield hit four-month highs of over 5.9 per cent. The rate rises when investors become more worried about a country’s finances. The yield on 10-year Spanish bonds in the secondary market dropped back to 5.89 per cent Wednesday.
Yields on 10-year Italian government bonds had added as much as 0.31 of a point on Tuesday but yields on Wednesday relaxed by 0.09 of a point at 5.5 per cent.
The borrowing rates of Italy and other financially shaky eurozone countries like Spain had eased in recent months after the European Central Bank gave banks emergency loans and the government of Italian Prime Minister Mario Monti implemented austerity measures.
However, that lending program by the ECB expired at the end of March.
Oil prices improved with the May crude contract on the New York Mercantile Exchange ahead $1.68 to US$102.70 a barrel.
Copper prices added to Tuesday's losses, down a penny at US$3.64 a pound. The metal, widely viewed as an economic barometer as it is used in so many industries, has tumbled about seven per cent in the past week. It lost seven cents Tuesday amid data from China indicating slowing growth in imports and exports.
Traders are looking to the release of the latest reading on Chinese economic growth on Friday.
Bullion prices were little changed with the June contract down 40 cents to US$1,660.30 an ounce.
On the economic front, Canada Mortgage and Housing Corp. reported that the pace of Canadian housing starts remained brisk in March.
The housing agency estimated there were 14,517 actual starts in March, which translates to a seasonally adjusted annual rate of 215,600 units, up from a seasonally adjusted rate of 205,300 in February.