Dollar up on improved consumer sentiment

THE Australian dollar is higher on improved consumer sentiment.

THE Australian dollar is higher on improved consumer sentiment.

At 12pm AEDT today, the local unit was trading at 104.46 US cents, up from 104.07 cents yesterday.

Since 7am AEDT, it has traded between 104.25 US cents and 104.56 cents.

Westpac chief currency strategist Robert Rennie said a survey showing a jump in Australian consumer sentiment in November had given the currency a boost.

"We got a really strong reading," he said. "It suggests that, finally, we're starting to get some traction on confidence from rate cuts over the last year."
 
"Within the data, households seem like they're becoming more comfortable with the global outlook."

The Westpac Melbourne Institute Index of Consumer Sentiment for November, released today, rose by 5.2 per cent to 104.3 per cent - its highest level since April 2011.

However, concerns about the US fiscal cliff and Greek debt could weigh on sentiment in coming days, Mr Rennie said.
 
Incumbent US president Barack Obama is set to meet with Democrat and Republican leaders this week to discuss the so-called fiscal cliff - a series of tax rises and spending cuts which come in automatically in January and that could push the world's biggest economy into recession.

The market would also be watching for any sign that the Reserve Bank of Australia (RBA) might cut the cash rate at its December meeting.

Mr Rennie said wage price data, also released today, suggested there was room for a cut. Total hourly rates of pay, excluding bonuses, rose by a seasonally adjusted 0.7 per cent in the September quarter, after a rise of 1.0 per cent in the June quarter. The median market forecast was for a rise of 0.8 per cent in the September quarter.

"I think what we got today was a clear indication of moderation in wage cost pressure," he said. "We still expect a rate cut in December, and another one in the first quarter of next year."

Meanwhile, Australian bond prices were mixed at noon. At 12pm AEDT today, the December 10-year bond futures contract was trading at 97.025 (implying a yield of 2.975 per cent), unchanged from yesterday's close. The December three-year bond futures contract was at 97.480 (2.520 per cent), down from 97.490 (2.510 per cent).