The Canadian Press

The S&P/TSX composite index slipped 0.27 of a point to 11,538.12 as investors were unsurprised by the Bank Canada’s decision to hold the line on interest rates at 0.25%.

But currency traders sent the Canadian dollar tumbling almost two cents as the central bank strongly indicated a hike won’t happen until the middle of next year and delivered a clear warning of the damage being done to the economy by the surging currency.

The loonie closed down 1.98¢ at US95.17¢ after earlier sinking as much as 2.17¢.

The central bank cautioned that heightened volatility and the sharp rise in the Canadian dollar “are working to slow growth.”

It added that the country’s gross domestic product is still expected to grow by 3% next year, but only 3.3% in 2011, two-tenths of a point less than the Bank of Canada had forecast in July.

“We expected the Bank of Canada to make some comment about the Canadian dollar,” said David Watt, senior currency strategist at RBC Capital Markets, a week after the dollar closed within about 2.5¢ of parity with the U.S. dollar.

“But the comments that have been made are very stark and very clear — there’s no misunderstanding what the bank sees in regard to the Canadian dollar as it approached parity — it’s a significant risk to the outlook for the Canadian economy.”

On the TSX, the market was balanced by rising telecom stocks and falling gold companies.

The TSX telecom sector was up 1.2% with Rogers Communications (TSX:RCI.B) ahead 76¢ to $28.33.

The gold sector lost 0.8% despite the December bullion contract on the New York Mercantile Exchange edging up 50¢ to US$1,058.60 an ounce. Kinross Gold Corp. (TSX:K) declined 27¢ to $23.63.

The energy group was down 0.4% as the November crude contract on the Nymex eased 52¢ to US$79.09 a barrel. Canadian Natural Resources (TSX:CNQ) gave back $1.57 to C$76.66.

The TSX Venture Exchange moved up 0.82 of a point to 1,339.59.

In other economic data, Statistics Canada’s composite leading index — a snapshot of future economic activity — rose by 1.1% in September, its fourth straight gain. And the August reading was revised up from 1.1% to 1.2%. In September, seven of the 10 components advanced, led again by the stock market and the housing index.

Wholesale sales in current dollars fell 1.4% in August to $41 billion.

Statistics Canada blames weaker sales in automotive products, machinery and electronic equipment, and building materials for the decline.

New York markets were lower as investors balanced mixed news from the housing sector with more strong earnings news.

The Dow Jones industrial average declined 50.71 points to 10,041.48.

The Nasdaq composite index pulled back 12.85 points to 2,163.47 and the S&P futures was down 6.85 points to 1,091.06 despite well-received earnings reports from Apple Inc. and Texas Instruments.

And outside the tech sector, Caterpillar also surprised even as it said its profit plunged in the latest quarter as construction companies bought fewer of its big yellow-and-black machines.

But the company said it sees rebounding demand worldwide and lifted its profit outlook for the year. Caterpillar shares ran ahead $1.76 to US$59.61.

Shares in Vancouver-based Finning International (TSX:FTT), which is the world’s largest Caterpillar equipment dealer, moved up 57¢ to C$17.48.

But investor enthusiasm over earnings took a hit as the U.S. Commerce Department said that while home building edged up in September, applications for building permits fell by the largest amount in five months.

Some analysts suggested the drop in permits isn’t such a bad thing.

“I like the fact that building permits in the U.S. are lower,” said Don Reed, president and CEO of Franklin Templeton Investments Corp.

“The inventory levels of houses, unsold houses in the U.S., are at very, very high levels. And I don’t think they need to add to that stock.”

The TSX base metals sector was 0.66% ahead as the December copper contract on the New York Mercantile Exchange was down 3.45¢ at US$2.932 a pound after good economic news from China helped push copper up 12¢ on Monday. Teck Resources (TSX:TCK.B) advanced 70¢ to $34.36.

The tech sector was ahead 0.43% and shares in Aastra Technologies Ltd. (TSX:AAH) surged $4.42 to $28.23 after it said Monday it will begin issuing a quarterly dividend due to a jump in its third-quarter profit. The communications equipment maker said shareholders will receive a 15¢ dividend after its profits nearly tripled to $9.6 million.