Dollar well supported in afternoon trade, despite soft retail print

The local unit retained strong support in midafternoon trade, despite soft retail sales figures.

Australian one dollar coin sitting on a twenty dollar note. Shallow depth of field. Picture: istock

The Australian dollar remained well supported in midafternoon trade, despite soft retail sales data for December.

At 3.12pm (AEDT), the Australian dollar was at US76.68 cents, compared with US76.46c late on Friday.

Retail sales dropped in December as a sharp fall in demand for household goods helped to offset higher spending in clothing and food in the run-up to Christmas. Sales fell 0.1 per cent from a month earlier, the Australian Bureau of Statistics said, compared with economists’ forecast of a 0.3 per cent rise. The weakness might have been exaggerated by the closure of a large retail chain in the final months of 2016.

The fall in retail sales was driven by a sharp 6.6 per cent decline in the hardware, building and garden supplies sector, which the National Australia Bank said was attributable to the Masters hardware chain’s liquidation sale and closing. NAB estimated that the chain’s liquidation might have shaved 0.4 percentage point off monthly retail sales growth.

The Reserve Bank, which is set to hold its first policy meeting of the year on Tuesday, is expected to hold its cash rate steady at a record-low 1.50 per cent. A Wall Street Journal survey of 10 economists showed all expect the central bank to stand pat, as it has since August 2016.

After gross domestic product contracted 0.5 per cent in the third quarter, there is reason to be concerned that the economy has lost some momentum in recent months, economists said. Still, cutting interest rates might fuel already excessive growth in housing prices, economists said.

Dow Jones newswires