Australian dollar steadies as mood lightens

The Australian dollar was spared further losses today as China share prices rose while the iron ore price also recovered some lost ground.

The Australian dollar was spared further losses today as China share prices rose, news from Greece was viewed as more promising, while the iron ore price also recovered some lost ground.

At 4:56pm, the Australian dollar was trading at US74.74c, compared with US74.77c around the same point yesterday.

China shares rose, and other Asian markets made tentative gains, as investors assessed whether a recovery in Chinese stocks will prove sustainable. The Shanghai Composite Index rose 5.2 per cent to 3900.89, though the index is still off 24.5 per cent from its June high.

Currency traders also reacted favourably to news that a new Greek proposal for economic policy overhauls and budget cuts appeared to have moved closer to creditors’ demands on some of the most divisive issues.

Eurozone finance ministers and European leaders are set to assess the proposals during crisis meetings on Saturday and Sunday.

Meanwhile, the price of Australia’s biggest export, iron ore, was up. Iron ore rose 9.5 per cent to US48.30 a tonne, according to The Steel Index.

Locally, housing finance data showed that efforts by the bank regulator to stymie surging bank lending to property investors, looked to have been effective.

The number of Australian home-loan approvals fell sharply by 6.1 per cent in May from April, the Australian Bureau of Statistics said today.

Economists surveyed ahead of the announcement had expected a fall of 1 per cent. The value of loans for investment housing fell by 3.2 per cent from April, the ABS said.

Overheating Sydney property prices have been a major concern for the central bank, limiting it from cutting interest rates further.

The decline in housing finance in May is a possible sign that tighter lending criteria for investment loans introduced by the banking regulator is cooling the market.