CANBERRA: The Australian dollar has soared to a six week high near 73 US cents as the US Federal Reserve’s concern about a global economic slowdown dented the greenback. At 1700 AEDT on Friday, the currency was trading at 72.85 US cents, up from 71.77 cents on Thursday.
Soon after it hit a high of 72.98 US cents, its highest value since August 24.Minutes from the US Federal Reserve’s September policy meeting showed members voiced concerns about the impact of the slowing global economy, led by China, as it decided to leave the benchmark interest rate near zero. That has led to expectations of a delay to the rate hike many were expecting before the end of 2015.
“As the probability of a December Fed rate hike fell, the US dollar weakened noticeably, seeing renewed vigour breathed in currencies and commodities,” IG market analyst Angus Nicholson said.
BK Asset Management managing director Kathy Lien said the currency also got a boost from a rise in commodity prices, plus stronger Chinese stocks after that market reopened after a week-long holiday.
The local currency has now posted eight straight days of gains. “This is the longest stretch of strength for either currency since June 2014,” she said. Further gains may come, but AMP Capital head of investment strategy Shane Oliver said it is not the start of a larger rebound.
“The broad trend is likely to remain down as the Fed is still likely to raise interest rates sometime in the next six months, whereas the RBA is more likely to cut rates again and the trend in commodity prices remains down,” he said. The bond market softened as the share market’s rally continued, partly due to the local currency’s strength and higher commodity prices.
At 1630 AEDT on Friday, the December 2015 10-year bond futures contract was trading at 97.260 (implying a yield of 2.740 per cent), down from 97.350 (2.650 per cent) on Thursday. The December 2015 three-year bond futures contract was at 98.130 (1.870 per cent), down from 98.200 (1.800 per cent).
