Dollar rally eases before PMI, retail sales

THE Australian dollar was stronger today after global equity markets posted another night of gains on the back of better than expected manufacturing and jobs data from the US.

THE Australian dollar was stronger today after global equity markets posted another night of gains on the back of better than expected manufacturing and jobs data from the US.

At 0710 (AEST) yesterday, the Australian dollar was trading at 106.97 US cents, up from 106.86 US cents on Wednesday.

Since 1700 (AEST) yesterday, the local unit traded between 106.59 US cents and 107.22 US cents.

GFT Forex director of currency research Kathy Lien said the Australian dollar held its ground overnight against a weak greenback, as equity markets posted further gains.

"This is the fourth day in a row that we've had continued gains in the Aussie, but we are seeing the rally lose momentum," Ms Lien said.

Ms Lien said appetite for the Australian dollar was slowing ahead of important economic data due out on this morning, including the performance of manufacturing (PMI) index for August and July retail sales.

"For the most part this week the strength of the Aussie dollar has been tied to the weakness in the US dollar," Ms Lien said.

"Now that we have Australian data coming out we are seeing some hesitant trading."

Ms Lien said it would be difficult for the Australian dollar to sustain its gains if the data was weak.

Equity markets in Europe and the US got a lift overnight, after US PMI figures showed factory orders rose strongly in July on the biggest jump in demand for cars in more than eight years and a surge in commercial aeroplane orders.

The Institute of Supply Management-Chicago reported that its purchasing managers' index came in above analysts' forecasts at 56.5 in August. Any number greater than 50 indicates expansion.

Unemployment rates also fell in a majority of US cities in July, despite a weak economy that is producing few jobs.

Separately, payrolls firm ADP said the US private sector created 91,000 jobs in August, which fell short of expectations.