The Australian dollar fell as news that North Korea planned more rocket launches hurt sentiment already weakened by disappointing earnings from Apple and a downgrade to the International Monetary Fund's global growth forecast.
At 4.08pm AEDT, the dollar was buying $US1.0513, down from $US1.0534 late yesterday and below a session high of $US1.0557.
HSBC's preliminary Chinese purchasing managers index for January, which rose to a 24-month high of 51.9 from a final reading of 51.5 in December, wasn't enough to boost the Aussie dollar.
"Traders are now looking for the next catalyst to drive the markets higher," said Ben Taylor, a trader at CMC Markets. "Many are pointing to continuous central bank support around the world, a rebounding China, improving risk in Europe and general low inflation as drivers."
Domestically, economists continue to debate the future direction for Australian monetary policy after fourth-quarter inflation data released yesterday cleared the way for more central bank easing, if required.
While few analysts expect the Reserve Bank of Australia to cut rates when it meets on February 5, further easing is tipped over coming months that would take upward pressure off the Australian dollar.
"More stimulus will likely be needed," said Citi economists in a note. "Policy is still working, but is reliant on a narrower range of channels. Key will be asset prices, and in particular the share market, which already is responding helped by improved global developments."
They argue that borrowing costs for consumers should be at least another 50 basis points weaker.
Since November 2011, the RBA has cut its cash rate by 1.75 percentage points.
A survey of 18 economists by The Wall Street Journal shows a low expectation of a cut in February - 13 out of 18 economists expect no change in the RBA's key rate. Market pricing for a rate cut is hovering around 40 per cent.
"We continue to look for the bank to wait until March," said Skye Masters, an interest-rate strategist at NAB.
