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Dollar bounces back

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The Australian dollar has hit a three-week high after weaker-than-expected economic data caused a sell off in the greenback.

Early on Wednesday, the local unit was trading at 88.61 US cents, up from 88.13 cents on Tuesday.

The currency peaked at 88.82 US cents, early on Wednesday morning, its highest level since October 9.

New orders for US manufactured durable goods dropped 1.3 per cent in September on the back of a decline in volatile transportation orders, government data showed.

National Australia Bank senior economist David de Garis said the data sparked a sell-off in the US dollar.

“Reasons to sell the US dollar came from a weaker-than-expected reading from the September US durable goods orders report,” he said.

“The upshot this morning is that the likes of the euro, sterling, Australian dollar, NZ dollar and Canadian dollar have made some net gains against the US dollar overnight.”

On Wednesday, markets will focus on the release a Chinese consumer sentiment survey from Westpac.

Then, early on Thursday morning, all eyes will be on an announcement from the US Federal Reserve after its two-day policy meeting.

The focus will be on any hints as to the timing of a Fed interest rate hike some time in 2015.

“It seems likely they’ll retain their view that it will be a considerable period of time before rate lift-off,” de Garis said.

In overnight equity markets, the Dow has jumped back above 17,000 following a strong report on US consumer confidence and another round of mostly solid corporate earnings.

The Dow Jones Industrial Average on Tuesday rose 187.81 points (1.12 per cent) to 17,005.75, its first close above 17,000 since October 3.

The broad-based S&P 500 gained 23.42 (1.19 per cent) to 1,985.05, while the tech-rich Nasdaq Composite Index soared 78.36 (1.75 per cent) to 4,564.29.

The Conference Board said the consumer confidence index leaped to 94.5 in October from 89.0 in September, a cheery sign for the upcoming holiday shopping season.

Jack Ablin, chief investment officer at BMO Private Bank, said the report offset a “lousy” drop in durable goods orders for September because of a decline in volatile transportation orders.

Michael James, managing director of equity trading at Wedbush Securities, said most earnings have been “very solid”.

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