The Australian dollar climbed to a one-year high on Wednesday, boosted by firm gold and commodity prices and a slumping US dollar. The favourable factors eclipsed a surprising drop in retail sales in Australia in July, which some saw as dimming the chance of an interest rate hike in October and even November.
The Aussie rose to as far as $0.8662, dipping slightly to $0.8584 after the data and then steadying around $0.8595, a good 3.5 US cents from last week's low.
"Gold prices are hovering around $1,000 and people are still concerned about US dollar weakness. That's why the Aussie is still hanging in there," said David Scutt, a dealer at Arab Bank Australia. It fell to 79.47 yen from a 3-1/2-week high of 79.99 yen earlier in the day, but is still up around 3 yen from last week's low 76.37.
The US dollar index hit a one-year low on Wednesday as sentiment towards it took a knock after the United Nations called for a new world reserve using several currencies. However, gold and commodities, which are priced in the US dollar, benefited from the weaker US currency. That boosted the Aussie, a favourite commodity currency. Australia is a key seller of commodities such as iron ore and is the world's third-biggest exporter of gold. So firm was demand for the Aussie that a 1 percent fall in retail sales in July, against forecasts for a 0.5 percent rise, did not much hinder its progress.
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