SYDNEY--The Australian dollar consolidated around the US$0.9100 mark again Tuesday as the market digested domestic and Chinese economic data, while awaiting Thursday's Australian employment data and next week's meeting of the U.S. Federal Reserve.
At 0700 GMT, the Aussie was trading around US$0.9100 after hitting a three-month low of US$0.8990 last Friday.
In recent days, the Australian dollar has held its ground surprisingly well in the face of the greater likelihood of tapering by the Federal Reserve.
"The reaction from traders to better-than-expected U.S. economic data is suggesting that its positive connotations for global growth are outweighing concerns over stimulus withdrawal," said FXCM market analyst David de Ferranti." An upbeat economic outlook may help raise the appeal of the higher-yielding Australian dollar as investors turn increasingly comfortable taking on market risk in search of greater returns."
Comments from Federal Reserve members James Bullard and Richard Fisher following recent stronger-than-expected U.S. employment data indicated the Fed may be prepared to consider a small curtailment of its bond-buying program at next week's policy meeting, Mr. Ferranti added.
Domestically, business confidence pulled back again last month, further eroding large gains made following the election of a conservative government in September and underscoring the challenge for policymakers as the resource-rich economy continues to slow.
National Australia Bank's monthly business confidence slowed to +5 in November from +6 in October, further unwinding its rise to a more than three-year high of +12 in September. A separate measure of business conditions rose only slightly last month to -3 from -4, indicating that much of the real economy remains weak. The employment conditions index fell to -8 from -3, implying further deterioration in unemployment.
"Firms are continuing to reassess their lofty election-related expectations given continuing sub-par business outcomes," said Alan Oster, chief economist at National Australia Bank. "Whether current confidence levels can be maintained given weak forward indicators remains a key question."
Housing finance data released Tuesday showed the value of lending to investors grew at a sizzling 8.2% pace in October, continuing a solidly rising trend. But the number of loans for construction of new dwellings, which typically spurs demand for building materials and fittings, rose a tepid 1%.
"The signs from the November business survey are consistent with no further rate cuts from the Reserve Bank," said Citi economists Paul Brennan and Josh Williamson in a note. "Moreover, the Reserve Bank needs to hope that pent-up demand for established homes, which is pushing up house prices, particularly in Sydney, will run its course over the next few months."
