Australian dollar takes a dive, oil nears four-year high
The US dollar rose on strong economic indicators, sending the Aussie dollar lower. (AAP: Joel Carrett)
The Australian dollar tumbled overnight as the US dollar rose on stronger-than-expected economic data, while Wall Street closed higher despite running out of steam through the session.
Markets at 7:45am (AEST):
- ASX SPI 200 +0.15pc at 6,152, ASX 200 (Wednesday’s close) +0.3pc at 6,146
- AUD: 71.08 US cents, 54.9 British pence, 61.9 Euro cents, 81.4 Japanese yen, $NZ1.09
- US: Dow Jones +0.2pc at 26,828, S&P 500 +0.1pc at 2,925, Nasdaq +0.3pc at 8,025
- Europe: FTSE +0.5pc at 7,510, DAX closed, CAC +0.4pc at 5,491, Euro Stoxx 50 +0.75pc at 3,081
- Commodities: Brent crude +1.3pc at $US85.90/barrel, spot gold -0.5pc at $US1,196/ounce
Global markets were boosted by higher oil prices and an improved investor mood in Europe, amid reports that Italy is planning to cut its deficit.
Oil prices were near four-year highs as markets focused on looming US sanctions against Iran, shrugging off an increase in US crude stockpiles and concerns about a rise in Saudi Arabian and Russian production.
Strong US economic data increased expectations the Federal Reserve would hike interest rates again in November.
A private jobs survey came in well above estimates and measure of activity in the services sector rose to its highest since 1997.
This fuelled a surge in US Government bond yields to multi-year highs and the US dollar rose to its highest in six weeks.
Fed chair Jerome Powell added to the positivity around the US economy, saying the current expansion “can continue for quite some time”.
NAB economists are expecting US Treasury yields to continue to climb.
“Solid data releases, higher oil prices and a technical backdrop that suggests there are not a lot obstacles for yields to continue to push higher will have many wondering how far this new push higher can go,” wrote NAB currency strategist Rodrigo Catril.
Aussie dollar hit by local data, US strength
The Australian dollar fell steadily against the US dollar, falling to its lowest since mid-September.
The decline started on Wednesday after the release of weaker-than-expected local building approvals data.
Approvals tumbled 9.4 per cent in August, led by a decline in the high-density housing sector.
“A downward trend has clearly been established and has intensified in recent months,” St George economists said.
“Weaker housing demand and falling house prices are increasingly weighing on residential construction activity.”
The Australian share market is eyeing a positive start to the session, with SPI futures pointing higher.