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AAP

2012-11-14

The Australian dollar is almost half a US cent higher on improved consumer sentiment and weakness in the greenback.

At 1700 AEDT on Wednesday, the local currency was trading at 104.52 US cents, up from 104.07 cents on Tuesday.

ANZ foreign exchange strategist Andrew Salter said the currency had received a boost from domestic data showing consumer sentiment at a 19-month high.

The Westpac Melbourne Institute Index of Consumer Sentiment for November, released on Wednesday, rose by 5.2 per cent to an index level of 104.3 - its highest point since April 2011.

A reading above 100 indicates more consumers are more optimistic than pessimistic about the economy and it was the first time in 14 months the survey has been in positive territory.

Mr Salter said weakness in the US dollar had also contributed to the rally in the Australian currency.

"The US dollar has been under moderate pressure and I get the sense that this is just a move to take profit in the US dollar," he said.

Mr Salter said international events, including the release of US retail data, were likely to drive the local currency's movements overnight and into Thursday.

He said concerns about the so called `fiscal cliff' of tax increases and spending cuts due to come into effect in the US in early 2013, were likely to weigh on the currency over the next few weeks.

If President Barack Obama and the Republican controlled House of Representatives cannot find an alternative solution to bring down American sovereign debt, it is feared the fiscal cliff measures could send the US back into recession.

At 1700 AEDT, the Australian dollar was at 83.12 Japanese yen, up from 82.49 yen on Tuesday, and at 82.16 euro cents, up from 82.07 euro cents.

Meanwhile, Australian bond futures prices finished the day lower.

Westpac interest rates strategist Tim Jung said bond prices eased on Wednesday after rallying overnight amid negative sentiment surrounding European and US debt issues.

"We did have a nice rally overnight, so while we have pared back a bit today, it hasn't been a meaningful move," he said.

At 1630 AEDT on Wednesday, the December 10-year bond futures contract was trading at 97.015 (implying a yield of 2.985 per cent), down from 97.025 (2.975 per cent) at Tuesday's close.

The December three-year bond futures contract was at 97.470 (2.530 per cent), down from 97.490 (2.510 per cent).

Evan Schwarten