AUD/USD: Aussie Bounces Higher After Strong Business Investment Data

 | Nov 29, 2013 12:19AM ET

The Australian dollar has reversed its recent slide and is pointed upwards in Thursday trading. AUD/USD has moved back above the 0.91 line in Thursday trading. The Aussie got a boost as Australian Private Capital Expenditure posted a sharp gain in October. HIA New Home Sales posted a sharp decline, falling to a three-month low. US markets are closed on Thursday for the Thanksgiving holiday.

The Aussie has finally turned the tables against the US dollar and posted gains on Thursday. The currency has plunged over three cents in little over a week, as it struggles to stay above the 0.91 line. There was good news as Private Capital Expenditure gained 3.1%, crushing the estimate of -1.1%. The business spending indicator has now posted back-to-back sharp gains. The news was not as positive from the housing sector, as HIA New Home Sales declined 3.8%, compared to a gain of 6.4% a month earlier.

In the US, employment numbers continue to look good. For a second straight week, Unemployment Claims came in lower than market expectations. With increasing speculation about a QE taper, employment releases will remain under the market microscope. If employment numbers continue to improve, we can expect the Fed to scale down QE early in 2014, which would likely give a big boost to the US dollar.

The RBA continues to try and "talk down" the Australian dollar, which the Bank says is impeding economic growth due to its high value. Senior officials at the RBA continue to hammer home this message, and did not mince words in last week's minutes, stating that "a lower level of the exchange rate would likely be needed to achieve balanced growth in the economy". The Aussie lost about two cents last week, but this may not be enough for the RBA, which wants to see the currency below the 0.90 level. Clearly, the Bank has been reluctant to take action and reduce interest rates, but the RBA has been dropping broad hints that this could change.