Investing.com - The Australian dollar was higher against the U.S. dollar on Tuesday as expectations for another rate cut diminished after data showed that business conditions rose to a two-and-a-half year high in December.
AUD/USD hit 0.8792, the highest since Thursday, and was last up 0.47% to 0.8779.
The pair is likely to find support at 0.8700 and resistance at 0.8810.
National Australia Bank said its monthly business conditions index rose to four in December from a reading of minus three in November, as low interest rates, higher house prices and a weaker exchange rate boosted sales and profitability.
NAB’s separate business confidence index was unchanged at six in December “and could possibly remain at these levels for longer than previously thought given that the conditions index has begun to respond”.
Meanwhile, investors were beginning to turn their attention to Wednesday’s policy statement by the Federal Reserve amid expectations that the bank will roll back its asset purchase program by another $10 billion, to $75 billion per month. The central bank announced the first cut to its stimulus program in December.
Concerns over the impact of the Fed scaling back its stimulus program, along with fears over a possible slowdown in China fuelled a broad based selloff in emerging currencies in recent sessions.
The Australian dollar tracked losses in emerging market currencies, tumbling to three-and-a-half year lows against the U.S. dollar on Friday.
Sentiment on emerging market currencies remained fragile ahead of an emergency meeting of Turkey’s central bank later Tuesday. Turkey’s lira spiraled to new lows against the dollar on Monday, sparking widespread risk aversion.
Elsewhere, the Aussie was higher against the yen, with AUD/JPY advancing 0.74% to 1.0611.