Dollar dragged down by weak retail spending

At 1900 AEST on Thursday, the local unit was trading at 70.

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14 US cents, down from 70.24 cents on Wednesday. 

During the afternoon the currency fell as low as 69.92 US cents, after new data showed retail spending fell 0.1 per cent in July, the first monthly fall in over a year.

FXCM currency strategist Ilya Spivak said the Aussie dollar faced heavy selling pressure after the downbeat data.

“The Aussie dropped alongside front-end bond yields, suggesting the disappointing print encouraged RBA rate cut speculation,” he said.

“Priced-in expectations now show traders expect at least one 25 basis point cut in the cash rate over the coming 12 months.”

At 1700 AEST, the Australian dollar was at 84.45 Japanese yen, up from Wednesday’s close of 84.29 yen, and at 62.51 euro cents, up from 62.24 euro cents.

Mr Spivak said financial markets will be focusing on Thursday night’s European Central Bank meeting and Friday’s US employment data for August.

“US jobs data looms large, discouraging traders from committing to a firm directional bias,” he said.

Meanwhile, the Australian bond market was steady in quiet trade.

“The Chinese stock market is closed so that gives us one less thing to watch, the market obviously has been quite fixated with developments in China for the past couple of weeks,” Nomura rate strategist Andrew Ticehurst said.

“The US bonds aren’t doing much and volumes are low, so we’re struggling for interesting things to say.”

At 1630 AEST on Thursday, the September 2015 10-year bond futures contract was trading at 97.285 (implying a yield of 2.715 per cent), down from 97.280 (2.720 per cent) on Wednesday.

The September 2015 three-year bond futures contract was at 98.210 (1.790 per cent), up from 98.200 (1.800 per cent).