Aussie dollar softer in afternoon trade

The local unit was weaker in afternoon trade, as a resurgent greenback dominated the market.

Australia’s terms of trade experienced its biggest gain in more than six years, supporting the local unit. Picture: istock

The Australian dollar dipped in midafternoon trade on Friday, as a firm US dollar took the drivers seat.

At 3pm (AEDT), the local unit was at US75.43 cents, compared with US75.73 late on Thursday.

The currency’s retreat came despite strong export price data, which confirmed Australia’s resource-rich economy is feeling the benefits of an unanticipated surge in coal and iron ore prices in 2016.

The greenback was higher after solid US data overnight. The US January service PMI was stronger than expected at 55.1, as were wholesale inventory numbers for December, while the January Kansas City Fed manufacturing index was strong.

Prices of Australian exports rose by 12.4 per cent in the fourth quarter from the third, to be up 12.4 per cent on a year ago, according to the Australian Bureau of Statistics.

The jump in export prices was driven by a 59.9 per cent rise in prices received for coal; an 11.3 per cent increase in iron ore prices, and a 10.7 per cent jump in prices paid for natural gas during the final three months of last year.

Craig James, chief economist at Commsec, said Australia’s terms of trade experienced its biggest gain in more than six years.

“This indicates a broadbased lift to incomes in Australia. The lift in export prices — especially iron ore and coal — also serve to benefit the bottom line of the government accounts, he said.

Dow Jones