Aussie higher on Fed rate cut outlook

The Australian dollar has opened higher today, surging in overnight trade on the back of some soft US economic data. During the overnight session, the Aussie traded between a low of 0.8721 and a high of 0.8910 which hit just prior to the open of the local session.  US economic growth slowed in October and the first half of November as a glut of homes for sale pushed home prices down and tighter credit took some would be buyers out of the market. Fed Vice Chairman Donald Kohn said renewed financial market turmoil could slow the economy to a halt quicker then previously thought. The Federal Reserve's Beige book, which provides an anecdotal description of economic conditions, supported Kohn's comments.

The Aussie made solid gains after investors turned their attention to interest rates which overshadowed ongoing concerns over conditions on credit markets. The Fed will now look at cutting interest rates when it meets on December 11, in an effort to stimulate the flagging US economy.  A strong lead from Wall Street also helped the Aussie to push through resistance levels. US stocks soared, sending the Nasdaq up more than three percent. Investors returned to riskier assets and higher yielding currencies which pushed the Aussie to a one week high against the greenback. The Aussie also rose to a new weekly high against the yen as demand for carry trades returned.