Dollar dips in late trade

Traders are focusing squarely on an upcoming speech by Federal Reserve chair Janet Yellen.

The focus of traders remaining squarely on a speech by US Federal Reserve Chair Janet Yellen later this week.

The Australian dollar was a little lower in late trade on Wednesday, with the focus of traders remaining squarely on a speech by US Federal Reserve Chair Janet Yellen at the end of the week.

At 5.30pm (AEST), the Australian dollar was changing hands at US76.03 cents, down from US76.16c at the same time on Tuesday.

Ms Yellen will speak at a conference at Jackson Hole, Wyoming, on the topic of designing resilient monetary policy frameworks for the future. Traders said the theoretical nature of the address might frustrate markets looking for clues around the timing of the next US interest rate increase.

Investors have been reluctant to bet on higher rates this year amid weak US productivity and economic growth data, but a string of hawkish commentary from Fed officials over the past week has brightened the outlook for rate increases.

Elias Haddad, senior currency strategist at the Commonwealth Bank of Australia said the longer-term focus of Ms Yellen’s speech could disappoint the market looking for strong signals about a near-term policy change.

There is a risk that the speech may therefore be perceived as dovish, and push the US dollar down, he added.

Earlier Wednesday, government data showed the pace of construction activity slowed sharply in the second quarter, an outcome likely to slow GDP growth in the quarter.

The value of construction work completed in Australia fell 3.7 per cent in the second quarter from the first quarter to $47.42 billion, the Australian Bureau of Statistics said.

Engineering construction work, which largely reflects activity in the mining sector, fell 9.0 per cent to $21.46 billion in the quarter.

Economists said the weakness was largely confined to Western Australia, a state that is feeling the full brunt of an ongoing mining investment slowdown. Construction fell a whopping 19 per cent over the quarter, taking its retreat to 40 per cent on-year.

But the rest of Australia (ex-WA) posted a 1.3 per cent rise in construction over the quarter, a second consecutive gain led by Victoria and Queensland.

UBS economist Scott Haslem said the big plunge in Western Australia is likely one of the last of the big hits to the economy of a mining downturn which began in 2011, and he continues to see the first half of this year as the darkest hour for construction activity. Mr Haslem called it the “peak of the capex drag.”

Paul Brennan, chief economist at Citigroup, said he expects GDP growth of 0.5 per cent in the second quarter, compared with first quarter growth of 1.1 per cent.

Still, he said his GDP forecast is preliminary with a number of partial components of growth to be announced in coming weeks, including merchandise trade number and business investment data.

But even with the projected slowdown in the quarter, annual GDP growth would still print above 3 per cent, about trend pace, he added.

- Dow Jones newswires