Aussie dollar bounces after strong data

Financial and commodity markets analytics

The Australian dollar is sharply higher today after a round of solid local data which may show the Australian economy is starting to diverse itself from the end of the mining boom.

At8.34pm (GMT) the Aussie dollar US70.28c up from US69.22c in yesterday’s trade.

The latest National Australia business conditions index came in at 11 and up from 6 in the previous month and boosting the local currency by more than US1c as traders took the figure as a sign that confidence in the business sector is picking up.

Considering the problems recently with China, Australia’s biggest trading partner, the index was seen as a morale booster with the economy able to withstand such shockwaves.

"While confidence tends to track conditions quite closely, recent financial market ructions and China growth concerns appear to have had an unnerving effect on business -- albeit not enough to send confidence into negative territory," noted NAB senior economist James Glenn

Avoiding a dip onto the pessimistic side of the ledger was a "good outcome" considering the levels of recent market volatility, he added.

Some see the bounce as short lived such as analysts at Westpac bank, who now predict the Australian dollar will fall to US66c before the end of the year, down from an early forecast of US70c

“We do not expect the confidence vibe around the Australian dollar to improve for the remainder of this year,” noted Westpac chief economist Bill Evans

“Negative market perceptions around China and Australia’s trade exposure to it are likely to persist, general emerging market woes are also set to continue, financial markets will remain volatile and we do not expect markets to be immune to the US interest-rate hike we expect later this month,” he added.


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