The Australian dollar held on to modest offshore gains on Thursday, helped by a slight easing in aversion to risk, although a dismal outlook for the global economy capped it at around 65 US cents. Regional stocks rose and commodities advanced, bolstered by China's decision to cut interest rates aggressively and by strong expectations of a stimulus package from the eurozone.
Also offering some support to the Aussie was upbeat economic data at home. Estimates for capital spending in 2008/09 by Australian businesses were upgraded to a record A$102.68 billion ($67 billion), 22 percent higher than the same stage last year, offering little glimpse that the economy was battling a sharp slowdown.
"The data was surprising, but then there is a risk that intentions could remain intentions," said Robert Rennie, chief currency strategist at Westpac. "The fact that big industries like BHP Billiton are pulling down the shutters tells us that big expansive projects are being rethought." Global miner BHP painted a gloomy near-term outlook for metals, just a few days after it dropped a $66 billion bid for rival Rio Tinto.
The Aussie was at $0.6504 against the US dollar, up from $0.6448 late here on Wednesday, but well below a near two-week high of $0.6618 struck on November 25. "From the rally in stock markets, one would expect the Aussie to have risen further, but there are risks associated with it given the central bank decides on rates next week and it has surprised by cutting rates sharply in the past few months," Rennie added.
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