Dollar down on US strength, China trade data

THE Australian dollar has fallen below 103 US cents following speculation that China's central bank will possibly move to stimulate its economy.

THE Australian dollar has fallen below 103 US cents following speculation that China's central bank will possibly move to stimulate its economy.

At 5pm AEDT, the local currency was sitting at 102.90 US cents, down from 103.09 cents last night.

Commonwealth bank chief currency strategist Richard Grace said the Aussie dollar's weak performance reflected the wider trend of currencies trending lower against a stronger US dollar.

"It's come off its highs from last night, but that's probably the case for most major currencies, mainly because the US dollar strengthened a little bit over the course of the day," he said.

"The Australian dollar has just eased a little on the cross rates, possibly due to the decline in the Chinese stock market, but it's hard to nominate a definitive catalyst.

"In our view, the US dollar will remain on an upward trend for the next 18 months, so this shouldn't be anything unusual."

The Chinese sharemarket rose on news that China's central bank could adopt a policy of economic stimulus following the weaker economic data released this week.

Mr Grace said the decision wouldn't be unexpected, given indications of weaker Chinese consumer price index (CPI) and import figures.

"Early in the new year, we had the release of the latest Chinese CPI (consumer price index) showing a further fall from its peak in July 2011," he said.

"Then when Chinese import data came out yesterday, imports were a bit down, and there was more discussion about monetary easing."

Looking ahead, Mr Grace said that optimistic US data would remain the influential factor in the market.

"We've got beige book data out this evening, and it's an interesting read on the state of the US economy, but it's likely to be consistent with this improving trend that we've seen," he said.

Since 7am AEDT, the Aussie dollar has traded between 102.70 US cents and 103.18 US cents.