WSJ:Australian Dollar Up Late As Central Bank Moves Buoy Confidence
Rates At 0630 GMT
Latest Change
AUD/USD 1.0336 +1.19%
AUD/JPY 79.40 +1.37%
6.50% May, 2013 3.5987% +0.0657
4.50% Mar, 2020 4.1776% +0.0915
10-Yr Spread To U.S. +216 bps Unchanged
SFE Dec 3-Year Futures 96.34 -0.15
SFE Dec 10-Year Futures 95.735 -0.09
SYDNEY (Dow Jones)--The Australian dollar was sharply higher Friday, buoyed by coordinated central bank moves Thursday to support liquidity in the European banking system, traders said.
Hopes were also high that a meeting of European finance ministers in Poland over the weekend would result in steps to support Greece, or potentially outline ways to bring about an orderly default on Greek sovereign debt should it take place.
The upbeat mood was reflected in strong equities across the Asian region, albeit the gains were posted on low volumes.
At 0630 GMT, the Australian dollar was at US$1.0336, up from US$1.0215 late Thursday. Against the Japanese yen, it was up to Y79.40 from Y78.32.
Attention is focused on the presence of U.S. Treasury Secretary Tim Geithner at the meetings in Poland amid expectations he will pursue moves to bolster the European Financial Stability Facility.
Grant Turley, senior currency strategist at ANZ Bank, said policy makers' actions in Europe boosted confidence. The move by central banks Thursday to open U.S. dollar swap lines is a practical step toward easing liquidity concerns, he said.
"It is important to see that the central banks are willing to act preemptively. It's a costless way of trying to get ahead of potential problems," Turley said.
With regard to Greece, Turley said some kind of default looks inevitable. The task for policy makers is to find ways to make it as orderly as possible.
Looking into next week, a meeting of the U.S. Federal Open Market Committee and speeches by senior policy makers at the Reserve Bank of Australia will shape trading, traders said.
Deutsche Bank chief economist Adam Boyton said the RBA is likely to cut interest rates next as the world environment sours, but financial markets are pricing in far too many cuts over the near-term.
"Of the dollar-bloc central banks, the RBA has the most scope to cut, but in our view the Australian front-end is pricing another financial crisis with essentially 100% certainty," Boyton said.
"While we think the next move by the RBA is down, we think the hurdle for multiple rate cuts in a short space of time is high," he added.
-By James Glynn, Dow Jones Newswires; 61-2-8272-4685; james.glynn@dowjones.com
