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Aussie steadies after stutter following Chinese data; kiwi rises

Wednesday, October 19, 2016 - 13:25
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The Australian dollar took a brief dip on Wednesday as China's industrial output data came in just below expectations, but a steady reading on overall economic growth was taken as a positive for commodity demand and prices.

[SYDNEY] The Australian dollar took a brief dip on Wednesday as China's industrial output data came in just below expectations, but a steady reading on overall economic growth was taken as a positive for commodity demand and prices.

The Australian dollar had notched five straight sessions of gains, and it quickly recovered from the slip, steadying to around US$0.7667, just below a two-week high of US$0.7690 struck on Tuesday.

"The Aussie has been trading well within 76-77 US cents. In the short term, today's data does not raise any concerns," said Craig James, chief economist at CommSec.

"I think once people digest the numbers fully we'll see that China's economy is transitioning well from an emerging country to an advanced country. There is some degree of cheer for Australia there."

China is Australia's single largest export market and a key driver of resource prices.

The Asian giant's economy grew 6.7 per cent in the third quarter from a year earlier, matching forecasts and a relief to investors who had feared a harder landing earlier in the year.

Still, much of the growth was founded on government spending and a rampant housing market, which might not be sustainable in the long run.

Meanwhile, US data released overnight failed to support the US dollar with a pullback in core inflation slightly reducing the probability that the Federal Reserve will increase interest rates in December.

"Potential for a higher US dollar keeps getting stymied by data, politics or Fed speakers. The Australian dollar, on the other hand, often looks like it will get pushed lower only to find fresh demand," said Paul Edwards, head of corporate FX sales.

Mr Edwards said the next trigger for the Aussie was domestic employment data out on Thursday, which forecasts suggest will show 15,000 new jobs were added last month.

The New Zealand dollar rose 0.4 per cent for its fourth straight day of gains following higher-than-expected inflation data on Tuesday and improving global dairy prices.

While economists still expect New Zealand rates to be cut by 25 basis points next month, the market had pared back chances of further easing after a run of upbeat economic news.

New Zealand government bonds gained, sending yields as much as two basis points lower.

Australian government bond futures also firmed, with the three-year bond contract up one basis point at 98.290 while the 10-year contract rose 2.5 ticks to 97.7150.

REUTERS