The loonie was down 0.51 of a cent to 96.45 cents US as the greenback gained strength against most currencies.
Canada Mortgage and Housing Corp. said that starts came in at 193,637 units in September, up from 183,964 in August.
"The result was much stronger than the street's expectations," said CIBC World Markets economist Emanuella Enenajor.
"And with the prior months' figure also revised up slightly, today's release suggest the homebuilding sector did better than expected in the late summer/early fall."
Elsewhere on the economic front, Statistics Canada said the trade deficit grew in August to $1.3 billion from $1.2 billion in July. The rise came as Canada’s imports grew 2.1 per cent in August, while exports rose 1.8 per cent.
Meanwhile, markets continued to focus on the U.S. with traders hopeful an agreement can be reached to end a budget crisis that threatens to end in the country defaulting on its debts.
A partial shutdown of the U.S. government is in its second week after lawmakers failed to agree on funding. Now, traders are increasingly worried that the two sides won't be able to come to a spending agreement before Oct. 17 when the government hits its debt limit and starts to run out of money to pay its bills.
"The U.S. government shutdown continues weighing on growth and highlighting a dysfunctional system while the markets are growing more cautious over the shutdown and the potential tail risks associated with the debt ceiling," observed Scotia Capital chief currency strategist Camilla Sutton.
"We do not see markets as complacent and instead see volatility measures moving higher."
That sentiment was borne out during the afternoon as short-term U.S. Treasury bill yields surged to levels not seen since 2008, in the midst of the financial crisis as investors worry about what happens if the debt ceiling is hit.
Commodity markets were mixed with the November crude oil contract on the New York Mercantile Exchange up 46 cents to US$103.49 a barrel.
December copper was unchanged at US$3.29 a pound while December gold bullion faded 50 cents to US$1,324.60 an ounce.