Following what has been an impressive run this year, the Australian dollar took a small breather against its U.S. rival in Wednesday’s Asian session. A weak batch of consumer data appeared to be the culprit.
In news published earlier, the Westpac Melbourne Institute Index of Consumer Sentiment posted a surprise 4.1% month-on-month drop in December to 100.0 when expectations were for an increase (rose 5.2% in November) after the RBA cut the cash rate earlier this month. The index is now below the November 2011 level when the RBA first cut the cash rate in the current easing cycle with cuts totaling 175 basis points so far. While consumers with mortgages responded positively to the RBA rate cut (confidence rose 4.4% for this category), other respondents were quite downbeat.
In other news, the U.S. dollar was modestly higher against some of its major rivals in Wednesday’s Asian session and fractionally lower against some of the other majors as traders wait for headlines out of the Federal Open Market Committee later today.
Later Wednesday, the Federal Reserve concludes its final monetary policy meeting of the year and with U.S. interest rates at historic lows, there is little room for the central bank to affect change on that front. However, the dollar will be in play as traders await the Fed’s sentiment on additional quantitative easing. Monetary stimulus typically depresses the dollar and drives riskier assets higher.