The Australian dollar weakened in Asia Tuesday after the third quarter trade deficit widened more than forecast, even as October retail sales came in stronger than expected ahead of the latest review of the Reserve Bank of Australia’s cash rate now at a record low 2.5%.
AUD/USD traded at 0.9098, down 0.09%, ahead of a decision due at 1430 local time (0330 GMT), with most economists expecting the central bank to hold the cash rate steady.
Retaill sales rose 0.5%, compared with a forecast for a 0.4% increase month-on-month and the current account balance widened to a deficit of AUD12.7 billion, compared to a forecast of an AUD11.6 billion deficit, though historical revisions to past data going back decades brought some confusion on the comparisons.
Overnight, the dollar gained against most major currencies after U.S. manufacturing data beat expectations.
The dollar saw support earlier after the Institute for Supply Management reported that U.S. manufacturing activity in November expanded at its fastest pace since April 2011, fueling expectations for the Federal Reserve to begin scaling back stimulus measures in early 2014.
Stimulus measures such as the Fed''s USD85 billion in monthly bond purchases weaken the dollar by driving down borrowing costs to spur recovery, and talk of their dismantling — the product of advancing economic data — tends to firm the dollar''s value.
The ISM manufacturing purchasing managers’ index rose to 57.3 in November from 56.4 in October. Analysts expected the index to fall to 55.0.
In Asia Tuesday, USD/JPY traded at 103.15, up 0.20%.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was 80.99, up 0.08%
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