Dollar still close to US74.5c

The local unit has remained strongly supported by the weaker greenback, as Chinese iron ore imports edged up.

The Australian dollar remained well supported in afternoon trade on Wednesday, helped by Tuesday’s Reserve Bank of Australia policy meeting, which cast doubt over the prospect of near-term interest-rate cuts.

The currency’s solid performance came alongside weakness in the latest trade data from China, although the country’s iron ore imports were up slightly.

With the US dollar taking a hit after US employment data on Friday damped expectations that the Federal Reserve would raise interest rates in June or July, support has returned to the Aussie, which was trading at its highest levels in a month, traders said.

At 6pm (AEST), the Australian dollar was trading at US74.48 cents, compared with US74.37c at a similar time onTuesday, having hovered around US74.50 earlier in the Sydney session on Wednesday.

Data released earlier in the day showed China’s exports in US dollar terms fell 4.1 per cent year-over-year in May, extending the 1.8 per cent decline seen the previous month. The drop in exports was slightly better than the median forecast for a 4.6 per cent contraction, however

On Tuesday, the RBA kept interest rates on hold at a record-low 1.75 per cent, but gave markets little to go on in terms of what it might do in coming months.

Economists said the lack of guidance suggested the RBA might move slower than previously thought in cutting rates over the rest of the year.

Richard Grace, global head of currency strategy at the Commonwealth Bank, said that while he hadn’t expected there to be forward guidance from the RBA, the market clearly had.

The Australian dollar has also derived support from gains overnight in the oil price, traders said.

Mr. Grace said higher European and US equity markets, higher iron-ore prices and a mixed performance on base-metal prices have also lent support to the currency.

Housing finance data for April showed lending to investors fell 5.0 per cent over the month as tightened lending conditions imposed by the banking regulator over the past year continued to slow growth.

Still, an economist at Deutsche Bank, Phil O’Donaghoe, said the banking regulator’s goal of taming investor lending, and cooling off growth in housing prices, might have reached an important milestone. Investor finance is now down a little over 20 per cent in year-ended terms, he said.

“It underscores the intended impact of a range of macro-prudential measures taken over the past year, including higher interest rates for investors,” Mr O’Donaghoe said.

Investors’ share of new housing finance commitments fell to 45.7 per cent in April, from a proximate peak of 53.5 per cent in May last year, bringing investor activity back into line with the long-run average of around 43 per cent, he said.