Australian dollar falls

The Australian dollar has fallen overnight, buying 73.52 US cents, down from 73.65 US cents on Monday.

Yesterday, the local currency has touched a multi-month peak in a knee jerk reaction to a pause in the Sino-US trade dispute, though there was plenty of caution about the prospects of a lasting peace.

The Aussie dollar was up 0.6 per cent at US$0.7360, having sprung to a four-month top of US$0.7384 in early trade.

The White House said President Donald Trump told Chinese President Xi Jinping that he would not boost tariffs on US$200 billion of Chinese goods on January 1 if Beijing agreed to buy an unspecified but “very substantial” amount of US goods.

“Details are sketchy on this,” noted Jarrod Kerr, chief economist at Kiwibank, in a research note.

“The US also set a deadline of three months to address the thornier issues like the claims of intellectual property theft,” he added.

“There is doubt that these more politically sensitive issues can be addressed in such a short time frame.”

China is the single biggest buyer of Australian resource exports and anything that threatens that demand tends to be bearish for the Aussie.

A survey on Monday showed Chinese manufacturers faced declining orders in November as the Caixin/Markit Purchasing Managers’ Index remained just in growth territory at 50.2.

Domestic data showed Australian firms racked up record levels of profits in the third quarter, while their wage bill expanded as they took on more workers.

Strength in the corporate sector contrasted with pressure on households from sluggish income growth and falling home prices.

The latest report from property consultant CoreLogic showed values fell 0.9 per cent across major cities in November, led by losses in Sydney and Melbourne.

“As long as the downturn in the housing market remains divorced from the broader economy, the Reserve Bank will continue to signal that rates are more likely to go up than down,” said CBA economist Gareth Aird.

“But the risk of a negative wealth effect impacting consumer spending is rising the longer the downturn in dwelling prices persists.”

The Reserve Bank of Australia (RBA) holds its monthly board meeting on Tuesday, and is considered certain to keep rates at 1.5 per cent and reiterate its gradual outlook for policy.

Figures on Wednesday are forecast to show annual growth in the economy slowed just a touch to a still-brisk 3.3 per cent in the third quarter.

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