Building a more consistent high
The sharemarket closed near its high for the year, marking it the fourth straight week of gains.
Investors are clearly more optimistic, and stocks have now risen 5.7 per cent since November 16 - the market's recent low.
For the week, the benchmark S&P/ASX200 rose 31.4 points, or 0.7 per cent, at 4583.1, while the broader All Ordinaries rose 39.3 points, or 0.9 per cent, at 4595.1 (the All Ord's high for the year).
Like last week, a batch of positive economic news provided evidence that global conditions were improving slightly.
But unlike last week, the biggest announcement this week had to do with the US Federal Reserve.
The Fed's decision on Wednesday to print another $US45 billion ($42.6 billion) every month to breathe life into its long-term bond-buying program, at least until its unemployment rate drops below 6.5 per cent, guaranteed that more money would be sloshing around the global financial system.
It might not have been a positive announcement, but it did not lead to the share market dropping off.
It saw the Australian dollar jump to a three month high, hitting US105.80¢ early on Thursday, before it settled at about US105.40¢ by close that day.
The dollar's reaction to the announcement came in the form of a cliche. To explain why currencies weaken or strengthen after a central bank loosens monetary policy, currency strategists like to say that traders "buy the rumour, sell the fact".
In the case of the Australian dollar-US dollar cross this week, that saw traders buying a bucketful of Australian dollars in the lead up to an anticipated event - the US Fed's quantitative easing (QE) announcement - and selling them once the announcement was made.
The point of such a move is to make a bit of profit and, that practice explains why Australia's dollar jumped to a three-month high in the early hours of Thursday morning, before slipping back down a little.
"It happens often enough that you can't ignore it," Westpac currency strategist Sean Callow said. "It's one of the first lessons you learn in markets: why didn't the dollar go down when the RBA cut rates? You then start to get into the realm of anticipation."
Mr Callow said that with a currency as heavily traded as the Australian dollar - it is the fifth most traded currency in the world - some traders will use it to see if they can make some money by reading the mind of the market.
When the US Fed intimated that it was going to print more money, and thus devalue its currency, ahead of that some traders started buying Australian dollars, betting that if there would be a broad-based sell-off of US dollars then the Australian currency would probably move as much as any currency.
"So you start buying in anticipation of the event, and when you get to the event ideally you're already sitting on a bit of profit," he said.
"And after announcement we got a pop higher [in the Australian dollar], which made some people happy. But then there's the incentive for them to say, 'I've made about one cent on this, I'm not sure how much further it'll go and I see that equities are starting to cool off slightly for whatever reason, it doesn't matter, I think I'll take profits on that,' " he said.
Making news on Friday, Caltex Australia flagged a return to profitability in calendar 2012 thanks to stronger sales of its fuel products and better refining margins.
Caltex was up 27¢, or 1.4 per cent, at $19.20.
Insurance Australia Group said it would sell its ailing British assets and that it expected to make a $240 million loss on the transaction.
IAG was down 9¢, or 1.8 per cent, at $4.72, which some analysts regarded as necessary short-term pain but positive in the long run.