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Loonie closes higher on better-than-expected housing starts

A Canadian dollar, or loonie, sits on top of its American counterpart in Toronto on Sept. 20, 2007.

THE CANADIAN PRESS

The Canadian dollar closed higher Monday amid a better-than-expected report on Canadian housing starts for May.The loonie edged up 0.19 of a cent to end at 91.68 cents (U.S.).

Canada Mortgage and Housing Corp. said housing starts increased to a seasonally adjusted annual pace of 198,324 last month, up from 196,687 in April. Economists had expected the pace to come in at 185,000, according to Thomson Reuters.

The biggest gains came in urban single-unit starts, which rose 5.4 per cent, while multiples dipped 0.8 per cent and rural starts fell 3.8 per cent.

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Higher commodities boosted the energy and gold sectors on the Toronto Stock Exchange as July crude in New York climbed $1.75 to $104.41 a barrel. August bullion gained $1.40 to $1,253.90 an ounce, while July copper fell a penny to $3.04 a pound.

Sadiq Adatia, chief investment officer for Sun Life Global Investment, said he sees little glitter in the gold sector despite Monday's increase in the August contract.

"Gold doesn't make sense when the economy is good and the risk appetite is there," he said. "Where gold will be beneficial is when inflation creeps back in ... so I don't see an upside in gold right now."

Adatia believes the loonie is overvalued, and that the currency, which relies heavily on commodities, will come down to the 90-cent range.

Elsewhere, there was little economic news to guide the Canadian dollar.

"With the Bank of Canada policy update and jobs data release completed last week and no real catalyst provided, the Canadian dollar should be range-bound for the most part and move directionally with risk appetite. Growth and inflation are key themes to follow," Rahim Madhavji of Knightsbridge Foreign Exchange wrote in a commentary.

Meanwhile, China, the world's second-largest economy, says its export growth accelerated in May, despite a decline in imports.

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Data released by China's General Administration of Customs on Sunday showed exports rose 7 per cent in dollar terms, up from a 0.9 per cent increase in April and rather large slumps in February and March.

Imports declined 1.6 per cent in May after inching up 0.8 per cent in April.

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