The Australian dollar is higher, buoyed by weakness in the US dollar which fell after the US Federal Reserve’s meeting failed to spell out the timing of an interest rate hike.
At 0700 AEST today, the local unit was trading at 77.49 US cents, up from 77.15 cents on Wednesday.
The Aussie slipped early in the overnight session, before recovering after the Fed’s announcement, which disappointed the market with members split between on how many rate hikes should occur this year.
Despite the lift in the local unit, BK Asset Management FX Strategy managing director Kathy Lien said there were also downward pressures for the Australian dollar in overnight trade.
“A surprise decline in the Westpac Leading Index and iron prices” had weighed on the currency, she said.
“The price of Australia’s most important commodity dropped to its lowest level in a month.”
Yesterday’s Westpac/Melbourne Institute Leading Index showed the Australian economy was losing momentum, weighed down by falls in dwelling approvals and consumer confidence.
On Wednesday evening, The Australian dollar fell below 49 British pence for the first time in almost six years.
The sterling has been rallying recently on the back of speculation the Bank of England is considering a rate rise.
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“Between the sharp rise in average weekly earnings and the Bank of England’s admission that wages may be rising at a faster pace than they anticipated, policy makers are warming to the idea of tightening,” Ms Lien said.
Westpac market strategist Imre Speizer tipped the Aussie to trade below 78 US cents today.
