TA:Australian dollar rebounds as US data cheers investors
THE Australian dollar was supported by a positive global risk appetite today despite an intraday dip caused by a negative long-term forecast for the exchange rate from Deutsche Bank.
At 5pm (AEDT), the local currency was buying US89.98c, a solid gain on yesterday’s closing level of US89.45c.
After falling sharply from US90.05c to US89.37c yesterday as China’s HSBC flash manufacturing PMI data undershot expectations, the Aussie bounced to US90.18c early today as US flash manufacturing PMI rose to its highest in nearly four years.
It subsequently fell to US89.84c as Deutsche Bank economists said the unit could fall to the mid-US60c by the end of 2015.
Chinese yuan weakness also contributed to the dip, analysts said, but the Aussie dollar soon regained US90c as regional sharemarkets rose.
“The region as a whole took its cue from Wall Street’s optimism,” Westpac economists said. “By the scale of recent moves, AUD/USD losses were moderate.”
After hitting a five-week high of US90.82c on Tuesday as risk aversion in global markets receded and the Reserve Bank of Australia reiterated that steady interest rates were appropriate as inflation rose more than expected in the December quarter, Australian dollar strength could be limited by expectations that the Reserve Bank of Australia wants to see it sustain the bulk of its recent fall in order to help the economy, Royal Bank of Canada analysts said.
“Signs that the weaker Australian dollar was starting to feed through into an export recovery as well as growing evidence that domestic policy was starting to gain traction in the housing and consumer sectors have resulted in less-aggressive verbal RBA intervention since December,” said RBC senior currency analyst Sue Trinh.
“The higher base for inflation means that the RBA does not want to see a sharp decline in the exchange rate from current levels, but it also wants to see the 12 per cent sell-off since May to be sustained since ‘lower levels of the exchange rate will assist in achieving balanced growth in the economy.’”
