IT was another day of gains for the dollar yesterday, as month-end buying and greater optimism lifted the currency to multi-month highs.
Better-than-expected building approvals numbers for June, which hinted at some signs of life in the sagging property sector, also helped to boost the currency.
The total number of houses and apartments approved for construction fell 2.5 per cent to a seasonally adjusted 13,336 in June from May, the Bureau of Statistics said. But economists on average had expected the approvals to fall 15 per cent.
"The modest slide in building approvals is not overly concerning, especially given the sharp gains recorded in the prior month," said Craig James, economist at CommSec.
At 5pm AEST, the dollar was trading at $US1.0519, up US0.54c from Monday's close.
The bigger focus for the dollar remains offshore economic data and a slew of central bank meetings, including the US Federal Reserve, the European Central Bank and the Bank of England.
"The ramp-up in market expectations for bold action from the ECB have reached a point where it creates the opportunity for severe disappointment," said Chris Tedder, strategist at GAINCapital.
"We don't expect the Fed to produce anything of major significance at this week's FOMC meeting. When we combine all of these factors it creates some downside risk for the Australian dollar in the near term."
After a recent sell-off in Australian bonds, traders were awaiting the outcome of the Federal Reserve's two-day meting.
"Our base case is that the Fed will maintain current policy settings," said Commonwealth Bank strategist Adam Donaldson. "However, we see a higher than usual risk of further policy easing, given the clear loss of momentum in US economic activity."
