Trade Resources Economy Australian Dollar Gained After US Lawmakers Agreed on a Range of Measures

Australian Dollar Gained After US Lawmakers Agreed on a Range of Measures

The Australian dollar gained today after US lawmakers agreed on a range of measures designed to avert sweeping tax hikes and around $US110 billion in spending cuts, known as the fiscal cliff.

After weeks of negotiations that had already missed a January 1 deadline, the Republican-controlled House of Representatives approved a far-reaching bill that raises the tax-rate on couples with an annual income above $US450,000, extends a number of expiring business and individual tax breaks, and postpones some across-the-board spending cuts.

The legislation had already been approved by the Democrat-controlled Senate.

The agreement boosted sentiment among investors and meant that traders unwound some of their positions in the US dollar, the world's largest reserve currency, opting instead to buy currencies such as the euro and Australian dollar.

The Australian dollar was trading at $US1.0472, up from $US1.0397 in the afternoon session. Trading conditions across Asia were described as thin with Japan closed for a public holiday.

Strategists said the US fiscal agreement could push the Aussie back above $US1.05 as traders unwound safe-haven bets on the US dollar.

"The Aussie dollar is going to be well supported," said Andrew Salter, a strategist at ANZ Bank in Sydney. "Anything that's good for the global economy is good for the Aussie dollar."

The local currency largely ignored soft local data which showed house prices were weaker in December, damping expectations of a recovery in the property sector in 2013 and showing that aggressive interest-rate cuts over the past year had done little to spur demand.

The RP Data-Rismark December Hedonic Daily Home Value Index fell 0.3 per cent in December from November. The drop occurred even after a rate cut at the start of the month, when the Reserve Bank of Australia lowered its cash-rate target to 3 per cent from 3.25 per cent. Interest rates are now at the same level as the low-point reached at the height of the global financial crisis.

Also released today, the Australian Industry Group performance of manufacturing index was flat at 44.3 points in December - the 10th consecutive month that the gauge has remained below the 50 point mark that separates contraction from expansion.

"With home prices flat, manufacturing contracting, inflation contained and the global economy still creating uncertainties, the Reserve Bank will lean in favour of providing more monetary stimulus," said Craig James, chief economist at CommSec.

Source: http://www.theaustralian.com.au/business/markets/australian-dollar-gains-as-us-averts-fiscal-cliff/story-e6frg916-1226546697466
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Australian Dollar Gains as US Averts Fiscal Cliff
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