Dollar comes under more pressure
The currency was trading at US89.07¢, down from US89.58¢ on Thursday.
The US dollar rose after jobless claims dropped to their lowest in almost six years and an Institute for Supply Management manufacturing report for last month also came in much stronger than expected.
Locally, the Producer Price Index (PPI) for the June quarter - a measure of prices at the factory or farm gate before transport and other costs are added - rose 0.1 per cent, lower than the 0.3 per cent rise in the March quarter, Bureau of Statistics data showed.
ANZ foreign exchange strategist Andrew Salter said the Aussie also came under pressure after the government said the budget deficit was now expected to be $30.1 billion in 2013-14, rather than the $18 billion estimated in the last budget.
"The Aussie dollar has just been on the back foot all day while the US dollar has been stronger," Mr Salter said.
"The PPI data that we received did actually pressure the currency lower and the revision of the budget forecast and the revenue shortfall did weigh on sentiment."
Bond futures prices followed US Treasury bonds lower after the release of the US economic data.
Westpac senior market strategist Damien McColough said bond futures prices fell after US jobless claims dropped to their lowest in almost six years.
"The bearish momentum was established overnight with US Treasuries," Mr McColough said.
"Following the data, all the things you would expect to happen happened, so there was equity strength, currency strength and bond yields rising, which pushed our bonds a bit lower."
Mr McColough said the release of the government's economic statement had not had a major impact on Friday's prices.
"I wouldn't suggest that was a major driver of the price action," he said.
"But we do have a bigger budget deficit which needs to be filled by government bonds."
Frequently Asked Questions about this Article…
The AUD fell after a mix of stronger US economic data and weaker local data and fiscal news. US jobless claims dropped to their lowest in almost six years and US manufacturing (ISM) came in stronger-than-expected, boosting the US dollar. Locally, Australia’s Producer Price Index (PPI) rose only 0.1% in the June quarter (slower than the March quarter), and a revised federal budget forecast showed a larger deficit, which together weighed on the Aussie.
The article reports the Australian dollar trading at US89.07¢, down from US89.58¢ on Thursday — reflecting the intraday weakening driven by the US and local data releases and the budget revision.
Two key US releases drove the US dollar higher: jobless claims fell to their lowest level in almost six years, and the Institute for Supply Management’s (ISM) manufacturing report was much stronger than expected. Those outcomes supported US Treasuries initially and strengthened the US dollar, putting pressure on the AUD.
Australia’s PPI for the June quarter rose 0.1%, which was less than the 0.3% rise recorded in the March quarter. For investors, softer PPI suggests lower inflationary pressure at the factory/farm gate level, which can reduce expectations for tighter monetary policy and weaken the currency because it hurts sentiment about economic momentum.
ANZ strategist Andrew Salter said the Aussie came under pressure after the government revised the 2013–14 budget deficit to $30.1 billion (up from an earlier $18 billion estimate). The revenue shortfall and bigger deficit weighed on sentiment, contributing to the currency’s weakness.
Bond futures fell following moves in US Treasuries after the strong US data. Westpac strategist Damien McColough noted a bearish momentum in US Treasuries that led to equity strength, currency strength (USD), and rising bond yields, which pushed Australian bonds lower. Rising yields can affect fixed income returns and government borrowing costs.
Yes. The article quotes Damien McColough saying a bigger budget deficit will need to be filled by government bonds. That implies increased issuance, which can put upward pressure on yields if demand doesn’t keep pace with supply.
Investors should monitor US economic indicators (like jobless claims and ISM manufacturing), local inflation measures such as the PPI, and any further government budget updates or fiscal statements. These factors influenced the moves described in the article and can drive currency, equity, and bond-market volatility.
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