The Australian dollar made a run for multi-month highs against a swathe of major currencies on Thursday after a surprisingly strong retail sales report bolstered the case for a February interest rate rise.
The dollar shot up over half a cent within seconds of data showing sales in November grew a surprisingly strong 1.4 per cent. Bond and bill futures fell as investors raised the chance of a 25-basis-point rate rise next month.
"The December quarter is now set to be a corker for retailers," said Robert Henderson, an economist at NAB Capital. "If the Reserve Bank of Australia chooses to pause on February 2, surely they must act to tighten rates further in March."
At the local close, the dollar was firm at $US0.9209, after climbing as far as a five-week high of $US0.9268, from Wednesday's close of $US0.9144. The rise was helped by stop-losses being knocked out around $US0.9220.
Some traders said losses in gold and copper prices late Thursday prompted them to sell the Aussie around $US0.9250 to keep some profits.
The Aussie is seen as a play on commodity prices because Australia is a big seller of iron ore, coal, copper and gold.
Copper prices were bruised after China's central bank unexpectedly tightened liquidity on Thursday, stoking worries that more policy tightening may lie ahead.
Against the euro, the Aussie darted past a key level of 0.6400 to a 26-month high of 0.6415 euros before inching back to close at 0.6399 euros. Hedge funds, mutual funds and pension funds are said to lead the buying.
The next resistance is at 0.6453. Traders say stop-losses are lined up at 0.6450 so a break will help the Aussie tear higher.
On sterling, the Aussie jumped to a 25-year high of 0.5771 pounds, up from Wednesday's 0.5709. Against the yen, the dollar was strong at 84.88 after hitting a 15-month high of 85.54.
For many investors, Thursday's retail sales report highlighted the sheer strength of Australia's economy because it shows consumer spending holding up despite two successive rate rises.
This is in marked contrast to other Western economies where recoveries are only in a nascent stage.
That was enough to persuade investors to tip a higher chance of a rate rise to 4.0 per cent when the RBA meets in February.
March bill futures shed 0.05 points to 95.53, and three-year bond futures lost 0.04 points to 94.83.
February interbank futures reversed earlier gains to trade down 96.105, implying investors are pricing in around a 58 per cent chance of a move.
"Today's retail data ends the debate about the strength or otherwise of the consumer," said Adam Carr, an analyst at ICAP. "We are odds on for a February rise."