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.
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