Further helping the local currency, and sentiment about the Australian economy, Australian house prices saw the first monthly rise in a year in November, buoyed in part by the first cut in interest rates from the Reserve Bank of Australia since early 2009. For November, the RP Data-Rismark capital city home value index rose 0.1 per cent from October, the first increase since 2010.
"Today's data shows tentative signs that house prices are responding to the RBA's modest policy easing, which, along with better affordability, should lend support to house prices," said Alvin Pontoh, an economist with UBS.
A decline in property prices across Australia in 2011 has been one of the largest concerns among foreign holders of Australian assets, including the local currency. More broadly, however, it was US initial jobless claims registering the fourth week in a row below 400,000, and data showing the number of Americans signing contracts to buy existing homes increasing to its highest level in 19 months, that gave the biggest push to risk-sensitive assets such as the Australian currency.
At 3.15pm (AEDT), the Australian dollar was trading at $US1.0143, up from $US1.0085 late yesterday. Against the Japanese yen, the Australian currency changed hands at Y78.715, up from Y78.454. At its current level, traders noted the currency could have some difficulty going much higher against the US dollar, with resistance firm at $US1.0145.
In the most anticipated report of the day, the Australian dollar was little changed by the final HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, which rose to 48.7 in December, compared with 47.7 in November. Despite the slight rise in the PMI, it remains in contraction territory.
Also of note for the local currency and fixed income markets, data from the RBA showed credit to the Australian private sector rose a seasonally adjusted 0.3 per cent in November from October. Total credit growth has been mildly positive since the middle of the year, though some parts of the credit market look likely to face a slowdown in 2012, said Michael Turner, a strategist with RBC in Sydney.
"With demand for credit from the business sector unlikely to pick up in 2012, credit growth is set to remain weak into 2012," Mr Turner said.