CANBERRA: The Australian dollar eased slightly on Monday after signs the central bank was still open to more interest rate cuts was offset by better-than-expected Chinese property data, a lift in non-mining positions vacant in April and a bout of late-buying. In late local trade the Aussie was fetching US80.21¢, compared with US80.47¢ at the same time on Friday.
At the beginning of a week which will be light on top-tier data, traders took their main cue from a speech by Reserve Bank of Australia deputy governor Philip Lowe to an investment conference in Sydney. Mr Lowe reiterated calls for structural reform to help Australian business, but also made clear the bank was still open to a third cut to the cash rate, after reductions in February and May.
He also admitted the RBA was caught between adding further stimulus to the economy and fears of encouraging more household indebtedness. “The RBA’s recent decisions have sought to strike a prudent balance – to help encourage consumption growth and thus business investment, but avoid the type of imbalances that could cause problems later on,” he said.
Mr Lowe later dismissed suggestions the bank had retreated from its easing bias in commentary around its May 5 decision to cut the cash rate for a second time.”We still have scope to lower interest rates if we need to,” he said.
His comments triggered an immediate drop in the local unit, by almost half a US cent to an intraday low of US80.06¢. Some RBA-watchers interpreted his address as a mild form of “jawboning”, or talking the Aussie down.
Mr Lowe also dismissed the idea of a global “currency war”, but admitted that the Australian dollar would have responded more directly to the RBA’s interest rate cuts but for widespread easing by central banks around the world.
“[Mr] Lowe avoided taking too big a swing at the stubbornly elevated Australian dollar, but clearly wants it lower,” said JP Morgan chief economist for Australia, Stephen Walters.”The unit rallied during the speech, but tumbled after the answer to the ‘easing bias’ question,” he said.
“We were puzzled that the explicit easing bias was removed from the RBA’s commentary when it delivered the rate cut two weeks ago – jettisoning the bias saw the Australian dollar soar back over US81¢ over subsequent weeks, but [Mr] Lowe confirmed [on Monday] morning that the implicit easing bias is still there,” he said.
The Aussie on Monday also responded to results from jobs website SEEK showing a 5 per cent month-on-month rise in positions vacants advertising in April. Non-mining states New South Wales and Victoria led the way, although there was also a robust recovery in Queensland. Traders also too heart from the latest official survey of house prices across Chinese cities, which correlates directly with demand for Australian iron ore.
New-home prices in April fell in 47 of the 70 cities tracked by the government, the National Bureau of Statistics said, compared with declines in 49 in March. China relaxed mortgage policies for some homebuyers at the end of March, adding to monetary easing measures since September.
