Australian Dollar Ends Lower After Day of Mixed News

 
   By James Glynn 
 

        SYDNEY--The Australian dollar was lower Tuesday after a mixed session that initially saw the currency rise on news of a bounce in business confidence in March, but later retreat on news that Western Australia now faces a potential ratings downgrade.
        The Australian dollar was trading at US$0.7580 at 0645 GMT, down from US$0.7601 late Monday. It traded as high as US$0.7626 earlier.
        According to a survey by National Australia Bank, both business confidence and business conditions improved solidly in March.
        NAB chief economist Alan Oster said the recovery in confidence suggests that a recent slowdown in economic growth might soon end.
        "If maintained it could well boost confidence further," he added.
        Australia's central bank has long argued confidence needs to turn up in order to support a much-needed bounce in investment outside of mining.
        Westpac currency strategist, Sean Callow said the rise in confidence might reflect the effects of a surprise cut in interest rates in February.
        "It could be that the RBA's February rate cut is paying dividends, although the impact appears to be a little quicker than would be expected," Mr. Callow said.
        The upbeat mood was later damped by news Western Australia might soon be downgraded, partly due to falling iron ore prices.
        Standard & Poor's said Western Australia's long-standing AA+ rating had been put on creditwatch negative, meaning a downgrade is likely unless its fiscal outlook improves.
        Australia's AAA credit rating wasn't impacted by the switch, S&P said.
        "Slumping iron-ore prices will considerably reduce the state's mining royalties, and without corrective actions by the state we forecast that its operating position will sustain deficits for the foreseeable future, " the firm said in a statement.
        RBC debt strategist, Michael Turner, said spreads on Western Australian state bonds widened by around 10 basis points over the government bond curve, which would seem to imply a high probability of W.A. losing its rating," he said.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        April 14, 2015 03:28 ET (07:28 GMT)

#FX
#Forex
#AustralianDollar
#EndsLower
#AfterDay
#MixedNews