News from AAP

Aussie dollar falls one and a half cents Wednesday

Print This Post A A A

The Australian dollar was one and a half US cents lower on Wednesday, weighed down by changed interest rate expectations and the release of weak economic data in the United States overnight.

In addition, some downwards pressure on the Aussie came from renewed confidence in the greenback and support for US dollar denominated Treasuries after the US passed a debt deal that would ensure the country did not default on its loans.

At 1200 (AEST), the Australian dollar was trading at 107.04 US cents, down from 108.90 cents on Tuesday.

The Australian dollar has fallen steadily since the Reserve Bank of Australia (RBA) announced that it kept the benchmark interest rate at 4.75 per cent on Tuesday afternoon. While the market generally expected interest rates to stay on hold, there were genuine concerns on an interest rate increase following recent high inflation figures.

RBA governor Glenn Stevens, in a short statement with the decision, said that while the June quarter inflation figures were high, inflation should stay in the two to three per cent target range for the rest of the year.

HiFX senior dealer Dan Bell said investors were moving out of high-risk, high-yield assets and moving in to safe haven assets amid rising concerns about US economic weakness.

“The Aussie dollar was weaker following that statement and weaker overnight following further risk aversion,” Mr Bell said from Auckland. “We also had the RBA yesterday with a statement, which was not as concerned about inflation as expected.”

Data released overnight showed US consumer spending dropped 0.2 per cent in June, the first decline since September 2009.

“Uncertainty about the global outlook continues to weigh on investor sentiment,” Mr Bell said. “The weaker consumer spending in the United States weighed on growth expectations of the US economy and that follows weaker manufacturing data earlier this week and weaker GDP (gross domestic product) number last week. So you’ve got more analysts revising down their growth expectations for the US economy and their outlook for US equities.”

The focus for the Australian market on Wednesday is the release of June retail sales figures and international trade data.

“Retail sales are going to be important because of the recent weakness,” Mr Bell said.