TA:Australian dollar up as Syria crisis eases, China news improves
THE Australian dollar was higher today as the threat of a military attack on Syria receded while economic data from China, Australia's biggest trading partner, showed improvement.
Late today, the Aussie was trading at US$0.8988, against US$0.8940 late on Friday.
US President Barack Obama said over the weekend that he would first seek authorisation from Congress before undertaking military action in Syria.
Congress is in recess this week and any discussion on the matter will take place after September 9, making military action unlikely this week.
A major commodity currency, the highly liquid Australian dollar often reflects shifting sentiment about the state of the global marketplace. The currency often also trades as a proxy for less liquid Asian currencies. Australia is the largest exporter of iron ore and a major exporter of coal to world markets.
On Sunday, China's official manufacturing Purchasing Managers Index rose to 51.0 in August compared with 50.3 in July, beating the median 50.6 forecast of eight economists polled by The Wall Street Journal.
Richard Grace, the head of currency strategy at the Commonwealth Bank of Australia, said buying of the Australian dollar extended into early European trading Monday, with the robust China data and strength in Asian stocks fueling demand.
The policy-making board of the Reserve Bank of Australia meets tomorrow, but is widely expected to keeping its cash rate target steady at 2.50 per cent. The central bank last cut rates at the start of August in response to benign inflation and slowing economic growth. It continues to signal it has room to cut interest rates.
Earlier today, house price data suggested the sector is responding to interest rates cuts. Australian capital city house prices rose 0.5 per cent in August from July, according to RP Data-Rismark today, taking the cumulative recovery to 7.0 per cent since the market bottomed out in May 2012.
Still, economists said housing alone won't be enough to spur strong growth as a decade-long mining investment boom fades. Second quarter national accounts data are due out on Wednesday.
"The Reserve Bank of Australia can feel more assured that their rate cuts are working even though second quarter economic growth data to be released Wednesday is likely to show activity expanding at a below trend pace," said Paul Brennan, chief economist at Citigroup.
