Dollar drops on economic data

THE Australian dollar fell after the release of weaker than expected housing and international trade figures.

Yesterday evening, the Australian dollar peaked at 94.37 US cents, its highest level since September 23. (AAP Image/Julian Smith)

THE Australian dollar fell after the release of weaker than expected housing and international trade figures.

At 12pm AEST today, the local unit was trading at 93.74 US cents, down from 94.04 US cents shortly before the figures were released.

The currency finished yesterday's local session at 94.20 US cents.

Building approvals fell 4.7 per cent in August, according to figures released by the Australian Bureau of Statistics, worse than the one per cent fall the market was expecting.

The international trade deficit narrowed to $815 million August, from $1.375 billion in July.

Economists had expected a deficit of $450 million in August.

The data prompted a further sell off in the Australian currency, Easy Forex senior dealer Francisco Solar said.

"It's holding steady but it's waiting for another catalyst to push it further down or consolidate and move back above 94 US cents," he said.

The Australian currency was struggling to hold onto gains earlier in the morning because of uncertainty over how long the US budget crisis will last.

Large parts of the US government are now closed after Congress failed to pass budget legislation by the end of the American financial year.

Mr Solar said negativity over the US budget shutdown caused a fall in precious metal prices in overnight trade, which caused some downward pressure for the Australian dollar on Wednesday morning.

"There probably is some hope there will be a resolution in the near term and we'll probably get a better sense of that as the week progresses," he said.

"What's really driving markets at the moment is the US government shutdown, the looming debt ceiling timeline, but in the short term this pull back was on the back of a poor trade balance and building permits numbers."

Mr Solar expects the Australian dollar to trade in a range between 93.30 US cents and 94.10 cents this afternoon.

Meanwhile, Australian bond futures prices were lower at noon.

The December 10-year bond futures contract was trading at 96.070 (implying a yield of 3.930 per cent), up from 96.095 (3.905 per cent) yesterday.

The December three-year bond futures contract was at 97.040 (2.960 per cent), down from 97.070 (2.930 per cent).

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