At noon (AEDT) on Wednesday, the currency was trading at 73.13 US cents, up from 72.58 cents on Tuesday.
Late in the morning it peaked at 73.43 US cents, its highest level since October 15.
Official figures, out on Wednesday, showed the economy grew by 0.9 per cent in the September quarter, which was better than market expectations, and an improvement on the 0.3 per cent growth in the June quarter.
Westpac chief currency strategist Robert Rennie said the currency did pop higher after the positive economic numbers but then started to fall away as traders took in profits.
“We are still closer to the upper end of the range we’ve seen over the past three months,” he said.
Rennie said there are doubts that the economy’s strength continues.
“It’s less clear that we will see the same kind of strength coming through in the fourth quarter, with the continued weakness in commodity prices and the strength we’re seeing in the Australian dollar,” he said.
At 8.36am (AEDT) on Wednesday, the December share price index futures contract was up three points at 5,267.
Locally, in economic news on Wednesday, the Reserve Bank of Australia governor Glenn Stevens is slated to deliver a speech to an Australia-Israel Chamber of Commerce (AICC) breakfast event in Perth.
The Australian Bureau of Statistics releases national accounts figures, including gross domestic product, for the September quarter.
In equities news, Collins Foods is expected to post half year results and TPG Telecom has its annual general meeting in Sydney.The Australian dollar has surged above 73 US cents, after the Reserve Bank kept the cash rate unchanged and the release of very strong building approvals figures.
At 8.36am (AEDT) on Wednesday, the local unit was trading at 73.27 US cents, up from 72.58 cents on Tuesday.
And the Australian share market looks set to open flat after strong gains on Wall Street with improving economic data from the eurozone offsetting disappointing China data.
The December share price index futures contract was up three points at 5,267. An Institute for Supply Management report out overnight showed that US manufacturing activity in November contracted for the first time in three years.
St George senior economist Jo Horton said US Treasuries strengthened following the data.
“The Fed fund futures only slightly reduced the chance of a December rate hike, suggesting a December rate hike is still likely, but that the pace of tightening thereafter will be gradual,” she said.
Horton said a speech from Federal Reserve Bank of Chicago president Charles Evans reiterated the view that any interest rate increase will be gradual and not move above 1 per cent in 2016.
Australian bond futures prices followed US Treasuries higher, continuing the move that was started on Tuesday after the Reserve Bank of Australia’s decision to keep the cash rate unchanged, Horton said.
“The futures market is pricing in a slightly lower chance of a rate cut by the end of 2016,” she said.
On Wednesday, the key market focus will be the release of official economic growth figures, which are expected to show that the economy grew at 0.7 per cent in the September quarter, much faster than the sluggish June quarter pace of 0.2 per cent.
At 8.30am (AEDT) on Wednesday, the December 2015 10-year bond futures contract was trading at 97.165 (implying a yield of 2.835 per cent), up from 97.130 (2.870 per cent) on Tuesday.
The December 2015 three-year bond futures contract was at 97.890 (2.110 per cent), steady with the previous local close.
NEW YORK – US stocks have started December stronger as health and retail shares bounce back and as vehicle sales suggest upbeat growth in November.
Katrina Lam, head of investment strategy and research at MV Financial, said the focus was on consumer and retail, which have been giving mixed signals to investors.
“Foot traffic in stores was lower. On the other hand more people are shopping online,” she said.
Offsetting the upbeat data was a report showing US manufacturing contracted in November for the first time in three years.
The Institute for Supply Management (ISM) said its index of national factory activity fell to 48.6, the first time the index went below 50 since November 2012. A reading below 50 indicates contraction in the manufacturing sector.
LONDON – Upbeat eurozone data, notably on jobs, have failed to cast off market wariness as traders wait for further hints on any fresh European Central Bank stimulus this week.
Markit Economics said its Purchasing Managers Index (PMI) for the eurozone rose to 52.8 in November from 52.3. The EU’s Eurostat agency said unemployment in the 19-country bloc fell to 10.7 per cent in October, the lowest level since January 2012, beating analyst expectations and confirming a slow recovery in Europe’s job market.
In Germany unemployment fell to its lowest level since the country’s reunification in 1990.
“Good news may dissuade Mario Draghi from pulling the trigger on more ECB QE, hopes of which have caused the eurozone indices to climb of late,” said analyst Connor Campbell at traders Spreadex.
HONG KONG – China’s factory activity weakened further in November in the latest sign of a growth slowdown, data shows, but analysts say the yuan’s inclusion in a basket of global currencies is a show of confidence in the world’s No 2 economy.
“China’s manufacturing sector remains sluggish due to the property slowdown,” said Zhou Hao, a Singapore-based economist at Commerzbank AG.
“While property prices are turning around led by first-tier cities, housing investment continues to moderate, reflecting a significant property inventory overhang.”
WASHINGTON – US manufacturing activity contracted for the first time in three years in November under pressure from falling energy prices, the stronger dollar and slowing global growth, a survey shows.
BRUSSELS – Eurozone unemployment has slipped to its lowest level for nearly four years in October, official data shows, beating analyst expectations and confirming a slow recovery in Europe’s job market.
BERLIN – Germany’s unemployment rate fell to 6.3 per cent in November, the lowest level since reunification in 1990, reinforcing expectations that private consumption will continue to support growth in Europe’s largest economy.
ENERGY
Oil prices have moved sideways as traders await the weekly US petroleum report and an OPEC meeting seen as unlikely to reduce output despite persistently weak prices.
“The crude oil market is trading little-changed as traders back off on establishing new positions ahead of Friday’s OPEC meeting, extending what has been a two-week period of sideways chop,” said Tim Evans of Citi Futures.
Remarks by OPEC kingpin Saudi Arabia indicating a willingness to discuss changing the cartel’s high production was met with scepticism from traders.
PRECIOUS METALS
Gold has risen for a second day, rebounding from last week’s five-and-a-half-year low, as a retreat in the US dollar prompted investors to cover short positions ahead of a European Central Bank (ECB) meeting and US payrolls data this week.
“Gold is still following the dollar ahead of the Fed decision,” MKS’ head of trading Afshin Nabavi said.
“It ran out of breath on Friday around $US1,051-ish, but having said that we have to break above $US1,095 for some fresh blood.”
BASE METALS
Copper has firmed on plans by producers in top metal user China to cut output, but gains were capped by data showing the Asian nation’s factory activity slowed in November, underlining the headwinds facing demand.
Ten major copper smelters in China said they would cut output by 350,000 tonnes in 2016, and also asked the government to buy metal for its strategic stockpile. The news follows similar moves already announced by China’s nickel and zinc makers.
“These factors taken together can at least stem the (copper price) slide … but the market wants to see evidence that it’s happening and not just a verbal intervention from producers,” said Julius Baer analyst Carsten Menke.
“In the medium to longer term, metals are well supplied and we don’t see any reason for a lasting recovery in prices. You still have headwinds from the (China) manufacturing and property markets,” he added.
ASX stocks to watch
CKF – COLLINS FOODS: Collins Foods is expected to post half year results on Wednesday.
TPM – TPG TELECOM: TPG Telecom holds its annual general meeting on Wednesday.
AAP
