The Canadian dollar closed higher Thursday amid rising commodities and a warning about the housing sector from the Bank of Canada.The loonie was up 0.45 of a cent to 98.37 cents U.S. on broad weakness in the American currency.
The central bank warned in its latest review of the health of the country’s financial system that an overbuilt and overpriced condominium market is posing a risk to Canadian households, banks and the economy in general.
The bank particularly singles out the Toronto condo market, which it notes continues to carry a high level of unsold high-rise units in the pre-construction or under construction phases.
However, the central bank cautions that its unravelling scenario is not what it is predicting. In fact, it still expects the correction in the housing market to go smoothly.
The review indicated that the Bank of Canada still views the overall risk to the financial system as being “high,” which has been the rating since December, 2011. However, the risks have decreased over the past six months.
Meanwhile, the World Bank lowered its global economic growth forecast, saying it expects expansion of only 2.2 per cent this year, down from a 2.4 per cent projection issued in January.
In its semi-annual Global Economic Prospects report, the World Bank also revised lower its expectations for growth in China, Brazil and India. At the same time, it raised growth estimates for Japan and the U.S.
Commodity prices were mixed as July crude on the New York Mercantile Exchange erased early declines to advance 81 cents to $96.69 (U.S.) a barrel.
August gold bullion on the Nymex fell $14.20 to $1,377.80 an ounce while July copper lost 4 cents to $3.18 a pound.
Financial markets were unsettled overnight with Tokyo’s Nikkei stock index tumbling 6.4 per cent while the Japanese yen strengthened 1.8 per cent against the U.S. dollar.
Japanese media reports say overseas hedge funds may be dumping the country’s equities following disappointment over the Bank of Japan’s decision earlier in the week to refrain from additional monetary easing measures.
In April, the Bank of Japan announced a massive stimulus in an attempt to get inflation up to two per cent. The euphoria that drove the Nikkei up to five-year highs but has since seen wild fluctuations and the index is now around 20 per cent down from its May 23 peak, leaving the market in bear market territory.
On the economic front, U.S. retail sales increased 0.6 per cent in May from April. That’s up from a 0.1 per cent gain the previous month. The April gain was led by a 1.8 per cent jump in auto sales, the biggest increase in six months.
And the number of Americans seeking unemployment benefits dropped 12,000 last week to a seasonally adjusted 334,000, a hopeful sign that steady job gains will continue.Report Typo/Error