The Australian dollar is lower against the greenback, driven by good US data and talk that the US Federal Reserve could begin tapering its economic stimulus program sooner rather than later.

At 0700 AEDT on Monday, the local unit was trading at 94.38 US cents, down from 94.80 cents on Friday.
Manufacturing in the US accelerated last month, with the Institute for Supply Management manufacturing index rising to 56.4 from 56.2 in September.

The strong data, as well as tapering comments from St Louis Fed President James Bullard and Philadelphia Fed President Charles Plosser, drove demand for the US dollar, BK Asset Management managing director Kathy Lien said.

That greenback strength saw the Australian dollar trade lower, despite recent strong local and Chinese data, she said.

“The recent demand for US dollars has been driven by adjustments in expectations for Fed tapering,” Ms Lien said.

“The acceleration in manufacturing activity suggests that the US recovery is not as weak as the market had feared… and this supports the case for earlier tapering by the central bank.

“We heard from two Federal Reserve officials who alluded to their desire to taper sooner rather than later.

“Both policymakers believe that growth will accelerate next year and their optimistic view suggests they favour earlier tapering.”

AAP