Australian Dollar Supported by Jump in Business Conditions

 
  By James Glynn 
 

        SYDNEY--The Australian dollar got a lift in Asia on Tuesday from news that business confidence and overall conditions jumped in June, signaling that economic stimulus earlier in the year is starting to drive increased economic activity.
        Business conditions rose to their highest level since last October providing a strong signal that a long-awaited recovery in investment in non-mining industries is starting to get underway, albeit slowly.
        The National Australia Bank's business conditions index rose 5 points to show a net balance of +11. Business confidence rose 2 points to +10, the strongest reading since September 2013. Trading conditions jumped 8 points to +20.
        At 0625 GMT, the Australian dollar was trading at US$0.7428, compared with US$0.7443 late Monday. Prior to the NAB data, it had traded at lows around US$0.7390.
        The economy excluding mining is starting to look a lot stronger, said Shane Oliver, chief economist at AMP Capital.
        "When you look at the data ex-mining, business confidence and conditions are clearly on the up," he said. "For those who are doubting that non-mining activity is starting to pick-up, that survey clearly indicates that it is," he added.
        Broad strength in the economy will argue strongly against the need for a further interest rate cut, economists said. NAB said it expects the next move in rates will be up in late 2016.
        The RBA has already lowered interest rates twice this year, while Treasurer Joe Hockey announced a confidence boosting budget on May 12, targeting stimulus at small business through tax concessions.
        Mr. Hockey told reporters in Canberra he thought the economy was gaining fresh momentum and that it would emerge mostly unscathed from the recent volatility in global markets.
        But earlier, news on consumer sentiment was less upbeat. Consumer confidence plunged 8% to a one-year low in the two weeks to Sunday due to a torrent of worrying overseas reports.
        According to the ANZ-Roy Morgan weekly survey of confidence, the mood of consumers fell 3.6% last week and 4.6% the prior week, a trend that if continued would signal stiffer headwinds to economic growth.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        July 14, 2015 02:43 ET (06:43 GMT)

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