Australian dollar falls

The Australian dollar is slightly lower Monday morning, buying 72.13 US cents from 72.16 US cents on Friday.

Last week, the local currency was on track to end the week with solid gains, buoyed by another promise of policy patience from the Federal Reserve and news of a new round of talks on the Sino-US trade dispute.

The Aussie dollar was a fraction firmer at 71.91 US cents, having touched a top of 72.05 US cents overnight.

That left it 1.2 per cent higher for the week and a world away from last week’s “flash crash” low of 67.15 US cents.

The Aussie got a domestic lift from data showing retail sales just pipped forecasts with a rise of 0.4 per cent in November, suggesting consumer spending picked up somewhat after a very soft third quarter.

“The risk to our fourth quarter consumption input into economic growth is now skewed a little to the upside,” said Robert Thompson, macro rates strategist at RBC Capital Markets.

“Spending benefited from the increasing impact of November sales events including Black Friday. The major caveat is that it could represent some pulling forward of Christmas-time consumption out of December.”

Risk sentiment had already got a fillip when US Treasury Secretary Steven Mnuchin said Chinese Vice Premier Liu He will “most likely” visit Washington later in January for trade talks.

The tentative sign of progress was enough to push the Chinese yuan to its highest since July, and the Aussie was dragged along as a liquid proxy.

Weighing on the US dollar was another round of dovish comments from top Fed officials.

Chairman Jerome Powell on Thursday stressed the central bank would be patient and careful on further rate increases.

Vice chair Richard Clarida said it would not want to wait too long before responding to a persistent slowdown in global growth before adjusting policy to offset that.

The global bond market had been rallying for weeks in anticipation of a Fed shift and confirmation has led to some profit taking in recent days.

Ten-year Australian government bond futures eased one tick on Friday to 97.6700, leaving them down 9.5 ticks for the week.

The three-year contract dipped 1.5 ticks to 98.185, but was off just a fraction for the week.

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