Aussie dollar traders shrug off poor data

The Australian dollar again traded in a narrow range today, with the Fed overnight affirming a US rate increase looked likely in September.

The Australian dollar again traded in a narrow range today, with the US Federal Reserve policy meeting overnight affirming a rate increase looked likely in September.

At 5pm, the local unit was trading at US73.01c, down from US73.21c yesterday.

The Federal Reserve cited progress in the US job market, a sign it remained on course to raise interest rates in September or later this year.

At the same time, however, it flagged a nagging concern about low inflation, which was creating caution among officials and could convince them to delay.

The Fed concluded its two-day policy meeting with a decision to leave its benchmark federal funds interest rate near zero, setting officials up for a potentially difficult call at the meeting to be held on September 16-17.

“This is another small step toward the first rate hike, and while there was no clear signal in this Fed statement, September still appears to be an option,” RBC Capital Markets said in a statement.

Local data on the day was mostly negative.

Trade price indexes for the second quarter showed a further deterioration in Australia’s export earnings versus the amount it pays for imports, economists said.

Stephen Walters, chief economist at JPMorgan, said the decline in Australia’s terms of trade had become stark.

“This is what happens when the economy moves into the shadows of the biggest boom in resource prices, investment and output we have ever experienced,” Mr Walters said.

“We have progressed onto the dark side of the boom, however.”