With a 0.2% loss from the previous forex trading session, the U.S. dollar index stood at 90.787. Wary investors weighed on the currency.
Although in recent days, it benefited from the optimism that the US economy will be able to recover faster. Moreover, that the Federal Reserve will be more tolerant of higher bond yields.
The Australian dollar has benefited from bets on a more speedy global trade. Also supporting the AUD is the stronger-than-expected economic growth in Q4 that fuelled hopes for a V-shaped recovery from the pandemic.
Oil prices bounced slightly from a two-week low overnight on expectations that OPEC+ producers will ease supply curbs at their meeting later this week as economies start to recover from the coronavirus crisis.
U.S. West Texas Intermediate crude added 0.15% to $59.85 a barrel, while Brent futures gained 0.33% to $62.91.
Cryptocurrency bitcoin erased early losses and rose 0.96% to $48,979. The digital coin is up 69% so far this year as it gains more acceptance in mainstream financial circles.
COVID Recovery Turns ‘V-shaped
In Australia, the economy expanded at a much faster-than-expected pace in the final quarter of 2020. This year has started firm with much help from massive monetary and fiscal stimulus.
On Wednesday, data from the Australian Bureau of Statistics (ABS) showed the economy sped up 3.1% in the three months to December. This was higher than the forecasts for a 2.5% rise and following an upwardly revised 3.4% gain in Q3.
Annual output still decreased by 1.1%, emphasizing the havoc wreaked by the coronavirus pandemic. That said, policy support will likely still be needed for the A$2 trillion ($1.57 trillion) economy. This is despite the best ever back-to-back quarters of growth.
The AUD rose about 10 pips to a day’s high of $0.7836 following the data.
Bond futures were lower. The three-year contract implied a yield of around 0.3% compared with the official cash rate of 0.1%.
Craig James, Sydney-based chief economist at CommSec said, the ‘V-shaped’ nature of the recovery is everywhere to see. It is seen in economic growth, the job market, retail spending and the housing market. He expects the economy to bounce back 4.2% this year.
Other data such as credit and debit card spending by major banks were pointing to a strong start for 2021. These also include official figures on retail sales, employment and building activity.