Australian dollar down due to weaker private capital expenditure

Australian Dollar

The Australian dollar suffered losses after an unexpectedly weak reading on capital expenditures in its home country.

For the fourth quarter of 2016, the official report of Private Capital Expenditure (PCE) showed a drop of 2.1 percent. This was significantly weaker than both the 0.5 percent fall expected and the 0.4 percent slip of the previous quarter.

The manufacturing capital expenditure, however, went up. Moreover, while PCE o buildings went down 4.1 percent that was less than the previous reports drop of 5.7 percent.

Still, weaker total capital expenditure is an economic negative because it shows that firms don’t see viable opportunities ahead. The first estimate for PCE in 2017 was below the expected 84.8 billion AUD at 80.6 billion AUD.

The Australian dollar went down 0.2 percent to 0.76678 from 0.76918 beforehand.

The dominant sentiment around the currency is still while record-low Australian interest rates potentially won’t fall any further, they probably won’t rise anytime soon as well. Reserve Bank of Australia Governor Philp Low, spoke on Wednesday reinforcing at least the first half of this premise. Responding to questions he reportedly said that the low interest rates probably weren’t needed now,

The U.S. dollar was pressured by the release of minutes from the Federal Reserve’s last monetary policy meeting. They announced that many officials may raise rates “fairly soon” if the economy continues to hold up. While that appears to leave a March move on the table, markets seem to have interpreted the minutes as less hawkish on this point than some of the Fed speakers we have heard since, and the greenback duly slipped early in Asian trade.

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