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Aussie dollar retreats again on concerns over economy

London

THE Australian dollar skidded lower on Wednesday after a consumer confidence gauge triggered fresh concerns about a slowing economy.

Sterling was the other big mover, adding more than half a per cent on hopes that British lawmakers will vote later on Wednesday against a disruptive "no-deal" exit from the European Union.

Foreign exchange markets elsewhere were mostly quiet, with investors reluctant to take risks as the cautious mood in Asia spread to Europe.

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A measure of Australian consumer confidence slumped to its lowest in over a year in March, adding to recent signs of weakness in the economy. Sentiment in China, a major trading partner for Australia, also deteriorated on Wednesday with Chinese share prices falling. The Aussie has been sensitive to signs of a loss of economic momentum, particularly after the Reserve Bank of Australia's upbeat outlook last week failed to dispel bets that it would have to lower rates eventually. The Aussie fell half a per cent to as low as US$0.70495, although it was above two-month lows of US$0.7003 touched last week. It had recovered to US$0.70615 by 1000 GMT.

"Yields have come off, stock markets are in the red and in FX land, US dollar and Japanese yen are outperforming at the expense of the Aussie and New Zealand dollar, particularly after softer domestic data," said Sue Trinh, an analyst at RBC Capital Markets. She said the weak March consumer confidence data in Australia highlighted "continued weakness in consumer spending", and especially a slowdown in the country's property market.

The New Zealand dollar, which often tracks the Australian currency because the two economies are closely linked, also fell, by 0.3 per cent to US$0.6838.

The euro made a small move upwards after better-than-expected eurozone industrial production numbers for January. The single currency rose 0.1 per cent to as high as US$1.1302.

The US dollar index was slightly lower, at 96.902 against rival currencies. Tuesday's softer-than-expected US February inflation data and falling US government bond yields have dented dollar demand, analysts said.

MUFG analysts noted that euro-dollar had "fully reversed last week's sell-off following the dovish European Central Bank meeting".

The Japanese yen held firm at 111.36 yen per dollar .

Sterling added 0.7 per cent against the dollar and the euro. Prime Minister Theresa May lost a second attempt on Tuesday to get her Brexit withdrawal agreement passed by parliament. But sterling's losses have been tempered because most investors are confident that Britain will avoid a chaotic "no deal" Brexit and instead seek to postpone its set March 29 departure date. The pound has had a rollercoaster ride this week, its range varying 31/2 cents against the dollar. REUTERS