The U.S. dollar rose vs. most major currencies as a fall in global equities and commodities encouraged investors towards safe-haven assets. Steps taken by the Chinese government to limit bank lending reduced demand for higher-yielding assets. Housing starts in the US fell 4.0% month-over-month in December from a revised 10.7% growth the previous month. Building permits increased 10.9% month-over-month in December, much higher than the 6.9% increase in previous month. The euro fell against the dollar as Greece’s bonds tumbled, meaning higher costs for Greece to borrow. Greece faces pressures from the European Union governments as it tries to handle its budget deficit crisis. The Greek budget deficit is more than four times the EU limit of 3% of the gross domestic product. Sterling declined from a six-week high against the dollar as Bank of England Governor Mervyn King voiced concern over the record budget deficit. King said that the recent pickup in inflation “should be temporary.” The unemployment rate unexpectedly dropped to 7.8% in November, with forecasts of an increase to 8.0%. The Japanese yen was steady against the dollar as safe-haven flows supported the currency. The Canadian dollar weakened against the dollar as crude oil prices declined below $78 per barrel. Also hurting the loonie was a report showing that consumer prices rose less than expected, reducing the chances for the central bank to increase interest rates from record lows of 0.25%. The consumer price index rose 1.3% year-over-year in December, lower than forecast 1.6%. Canadian manufacturing sales rose 0.1% in November, much lower than the revised 2.1% the previous month. Both the Australian and New Zealand dollar were both hurt against dollar with concerns that China will continue to limit bank lending, reducing the demand for higher-yielding assets. The Aussie was also hurt by a fall in commodity prices.

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