Dollar gains strength

coins, dollar, moneyThe Australian dollar has hit a one week high after the release of strong international trade and building approvals data.

At 0700 AEST on Friday, the local unit was trading at 88.02 US cents, up from 87.86 cents on Thursday.

Early on Friday morning it peaked at 88.27 US cents, its highest level since September 25.

The rally came after data out on Thursday showed that approvals for the construction of new homes rose three per cent in August, and almost 15 per cent for the year to August.

Meanwhile, Australia’s trade deficit narrowed to $787 million in August, from a deficit of $1.075 billion in July.

FXCM market analyst, David de Ferranti, said the figure beat expectations and helped the Australian dollar recover some of the losses made in September.

“On the US dollar side of the equation, the reserve currency’s recent run is beginning to show some signs of exhaustion, which could afford the Australian dollar some breathing room,” he said.

The Australian dollar got further support after the euro rallied against the greenback after the European Central Bank left its key lending and deposit rates unchanged and outlined plans to commence the purchase of covered bonds to stimulate the region’s economy.

However, the market wasn’t totally happy about the ECB statement.

“Disappointment stemmed from the absence of a cast iron commitment from Draghi to do whatever it takes to expand its balance sheet back to its 2012 peaks,” National Australian Bank global co-head of FX strategy, Ray Attrill, said.

The market is now waiting for the release of US non-farm payrolls employment data for September.

AAP

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