WSJ:Australian Dollar Recovers in Asia After Early Selloff
By David Rogers
SYDNEY--The Australian dollar recovered from an early selloff in Asia as the U.S. dollar weakened against most currencies following a lack of progress on the fiscal impasse that threatened to push the U.S. government into default in coming weeks. Disappointing international trade data from China had a brief negative impact on the Australian currency.
At 0700 GMT Monday, the Australian dollar was trading around US$0.9470. After opening down at US$0.9445 in Wellington versus Friday's New York close at US$0.9460, the local unit dived to US$0.9410 before rising steadily to a high of US$0.9474.
Monday's trading conditions were relatively thin due to holidays in Hong Kong and Tokyo.
The U.S. government shut down around two weeks ago and politicians in Washington appeared no closer to avoiding a possible default later this week. Over the weekend, talks between President Barack Obama and House Republicans broke down, leaving Senate leaders engaged in frosty negotiations of their own, with no progress to report by Monday in Asia. The U.S. Treasury will run short of funds if there isn't an agreement to raise the country's debt limit by Thursday.
Weekend developments suggest that a deal to extend the debt ceiling is further away than expected, said Deutsche Bank's Sydney-based head of foreign-exchange strategy John Horner. Risk sentiment was on a back foot in Asia, with the U.S. dollar retreating from last week's highs against the yen, although there is some support on persistent expectations that a deal will be done, given the potentially catastrophic consequences of a U.S. debt default, said Mr. Horner.
Also, over the weekend, China's monthly trade surplus shrank to US$15.2 billion versus US$25.2 billion expected by the market. Exports fell 0.3% versus and expected 7.2% rise, while imports rose 7.4%, in line with expectations.
Investors were awaiting Tuesday's release of minutes from the Reserve Bank of Australia's October board meeting. The minutes are expected to reinforce the view that the RBA is some way from adjusting interest rates. The RBA has cut interest rates eight times since November 2011, pushing rates down to a record low of 2.5% in August this year.
