The Australian dollar gained today, extending yesterday’s rally, even though fundamental data from Australia and the general market sentiment were not supportive for the Australian currency.
National Australia Bank reported that its business confidence index fell from zero in September to -1 in October, while the business conditions were worst since May 2009. The report said:
Businesses were more downcast in October, with the pessimism particularly apparent in the mining and construction sectors. It appears that the RBAâs decision to lower the cash rate by 25 bps to 3.25% at its October meeting failed to improve sentiment, with firms instead likely to be focussing on the reasons for the rate change â a softening global economy, fiscal tightening, a soft labour market and high AUD.
The poor sentiment is not surprising, considering how downbeat the global economy looks. Europe is still struggling with its problems and it is uncertain whether Greece will remain in the eurozone. Meanwhile, the United States are threatened by the fiscal cliff, not helping traders’ risk appetite either.
AUD/USD rose from 1.0426 to 1.0442 as of 19:28 GMT today, rebounding from the daily low of 1.0394. AUD/JPY was flat after falling earlier from 82.87 to 82.35. EUR/AUD dropped from 1.2184 to 1.2165, the lowest settlement since August 30.
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