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Loonie up amid solid housing data, traders take on more risk as tensions ease

Canadian Press DataFile

TORONTO - The Canadian dollar was higher Monday amid strong domestic housing data and a greater willingness to take on risk, even as traders kept a close watch on geopolitical flashpoints.

"A volatile global environment, with some easing in concern over Ukraine offset by an escalation in Iraq , is being watched carefully by markets," observed Camilla Sutton , Chief FX Strategist, Managing Director Scotiabank Global Banking and Markets.

The loonie was up 0.14 of a cent to 91.29 cents US as Canada Mortgage and Housing Corp. reported that housing starts during July came in at an annualized rate of 200,098, up slightly from 198,665 in June.

The currency tumbled over 4/10s of a cent Friday in the wake of a huge miss in July employment data. Only 200 jobs were created last month, a far cry from the estimated 20,000 positions that economists had expected.

On Monday, traders felt more inclined to take on risk after Russia called an end to military exercises near Ukraine on Friday and withdrew troops to their bases.

However, fighting raged in the city of Donetsk as Ukraine government forces closed in on the rebel stronghold and insurgents backed away from a cease-fire offer. There have been worries that Russia might directly intervene in Ukraine’s civil war if it appeared the pro-Russian rebels were in danger of being defeated.

There have also been worries about the effect of sanctions against Russia and counter sanctions, which could seriously damage a still fragile economic recovery in Europe .

Meanwhile, in Iraq , U.S. warplanes attacked Islamic State militants near the northern city of Irbil , capital of the Kurdish region, in hopes of limiting their advance and keeping them away from oil fields.

In China , that country's consumer price index in July stayed at 2.3 per cent, well below the official target for the year of 3.5 per cent. That gives the Chinese central bank room to ease access to credit if needed to shore up economic growth, which was 7.5 per cent in the latest quarter

It is a relatively quiet week for economic data with the latest retail data for Canada and the U.S. being released. Investors will also take in the July read on Canadian inflation and U.S. consumer confidence data.

On the commodity markets, September crude on the New York Mercantile Exchange gained 16 cents to US$97.81 a barrel.

The positive news from China helped push September copper up a cent to US$3.18 a pound, while the increased appetite for risk pushed December gold down 40 cents to US$1,310.60 an ounce.

© 2014 The Canadian Press. All rights reserved.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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