TA:Australian dollar boosted on hopes for US economic stimulus
STRONG Chinese economic data and speculation the US central bank will unveil measures to strengthen the world's largest economy this week boosted the Australian dollar today, leaving it stronger late in the local trading session.
However, trading was still cautious with two senior Reserve Bank of Australia officials due to make speeches in the next 24 hours.
At 4.30pm AEST, the Australian dollar was at $US1.0286, up from $US1.0195 late yesterday. Against the Japanese yen, the local currency was trading at Y78.43, up from Y78.035.
China's Conference Board Leading Economic Index increased 0.6 per cent in July to 158.6, following a 0.9 per cent increase in June and a 0.4 per cent increase in May. With Australia's economic fortunes closely tied to China, the report lifted stocks and the currency.
A better showing on Asian equity markets helped the risk-sensitive Australian dollar move higher, said Tim Waterer, a trader at CMC Markets. Still, with uncertainty high globally, the rally has been contained overall.
Traders said the upbeat mood across the region was also reflective of anticipation US Federal Reserve chairman Ben Bernanke would announce fresh measures to help the economy avoid recession.
"There's pressure for Bernanke to do more to support the recovery, but he faces dissent from other members of the FOMC. The political process isn't making things any easier for Bernanke," said Alex Stanley, a strategist at Commonwealth Bank of Australia.
"Despite some obvious opposition, we think the FOMC will vote in favour of further easing by the conclusion of their meeting," he added.
A key focus will be whether the Fed moves to introduce the so called Operation Twist, where the central bank lengthens the duration of its Treasurys portfolio in a bid to lower long-term borrowing rates.
In focus later will be a speech by RBA Deputy Governor Ric Battellino in New York.
Mr Battellino is likely to give a frank assessment of the risks in the global economy, but also highlight the strengths of the Australian economy, which is being stoked by a mining boom and demand for commodities from Asia.
Tomorrow, RBA Assistant Governor (Economic) Philip Lowe will also speak.
The RBA signalled this week it is concerned about a slowdown in the world economy and potential markets risks, but has yet to indicate a willingness to cut interest rates, now tightly held at 4.75 per cent.
