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Australia dollar lifted by upbeat economic news, NZ$ bruised

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The Australian dollar nudged higher on Thursday after it got a double boost of stronger-than-expected economic data at home and from top trading partner China, while the New Zealand dollar was on track for a third straight day of losses.

[SYDNEY] The Australian dollar nudged higher on Thursday after it got a double boost of stronger-than-expected economic data at home and from top trading partner China, while the New Zealand dollar was on track for a third straight day of losses.

The Aussie, often a proxy for China plays, edged up 0.2 per cent to US$0.7583 and away from a recent five-month trough of US$0.7532. However, it was still poised for a fourth straight month of losses.

China's official survey of manufacturing activity (PMI) firmed to 51.8 in November, compared with 51.6 in October and higher than forecast. That made November the 16th straight month of expansion.

The upbeat figures should help ease concerns that China's campaign to curb excesses in the financial sector and its war on smog could lead to a sharper-than-expected slowdown in the world's second largest economy.

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Australian data was solid too. Business investment hit its highest in more than a year last quarter while approvals to build homes climbed to the strongest in eight months, promising signs for a pick-up in broader economic activity.

Investments grew a seasonally adjusted one per cent in July-September to A$29.4 billion (S$29.95 billion), data from the Australian Bureau of Statistics (ABS) showed on Thursday.

"The outlook for investment is increasingly good, led by the non-mining industries, and even the drag from the mining sector continues to lessen," said ANZ senior economist Daniel Gradwell.

"The way that strength in surveyed business conditions is converting into actual investment is encouraging."

Separate ABS data showed that a four-year-old boom in home building, which has already done much to support the economy, had further to run.

The New Zealand dollar slipped 0.6 per cent to US$0.6840. For the month the currency is already down about 5 per cent, on track for its worst performance since January 2016.

The kiwi got a knock after a survey of business sentiment plummeted to an eight-year low in November as firms fretted about a change of government.

Separate data showed residential consents in October slipped a surprisingly sharp 9.6 per cent from a year earlier.

"Businesses are feeling very uncertain about a three party government and the change of government, and as a result they may hold off on business investment," said Dominick Stephens, chief economist at Westpac Bank.

New Zealand government bonds were mixed, with yields about 1.5 basis points higher at the long end and one basis point lower at short-end of the curve Australian government bond futures slipped, with the three-year bond contract down three ticks at 98.080. The 10-year contract fell four ticks to 97.4750.

The spread between Aussie and US 10-year bonds shrank to the smallest since 1998 at 13 basis points, diminishing the Aussie's appeal as a carry trade currency.

REUTERS

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