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Australia dollar nudges higher as RBA's Stevens offers nothing new

Friday, February 13, 2015 - 15:28
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The Australian dollar edged higher on Friday after the central bank governor offered no new insight into future policy, putting a squeeze on those looking for more dovishness.

[SYDNEY] The Australian dollar edged higher on Friday after the central bank governor offered no new insight into future policy, putting a squeeze on those looking for more dovishness.

The Aussie, which was savaged after worse-than-expected jobs data the previous day, was a touch firmer at US$0.7745.

It had bolted to a high of US$0.7779, from a low of US$0.7644, after soft US data dented the greenback and risk appetite improved on news of a ceasefire agreement in Ukraine.

Reserve Bank of Australia Governor Glenn Stevens disappointed those expecting a more downbeat view of the economy in his semi-annual testimony to a parliamentary committee, which would have hardened bets on a further rate cut in March.

Mr Stevens's comments were seen as mainly a rehash of the RBA's recent monetary policy statement. He also downplayed the previous day's weak jobs report.

While Mr Stevens repeated that he expected the currency to fall further, he did not subject it to another bout of jawboning. "Since Aussie traders got it wrong after yesterday's labour force data, I suspect many will be on the sidelines licking their wounds today," said Stephen Innes, a senior trader at OANDA Asia Pacific.

However, there was little reason to expect a change in the Aussie's longer term outlook. "But it's hard to believe that looming rate cuts and the prospect for further declines in commodity prices bode well for the Aussie in the long run," Innes said.

Financial market pricing based on interest rate swaps sees a 70 per cent chance of a rate cut to 2.00 per cent in March.

The New Zealand dollar, like its Aussie cousin, also benefited from the improved sentiment overnight, hitting a two-week high of US$0.7486 after the US data, before settling around US$0.7430.

The kiwi remained an outperformer against the Aussie, which slipped to a one-month low of NZ$1.0374, before trimming its losses, to last trade around NZ$1.0417.

Domestic data showed a 1.3 per cent rise in food prices in January, the strongest in seven months, driven by often-volatile fresh fruit and vegetables, but with an annual rate of 1.2 per cent they pose no threat to broader inflation.

New Zealand government bonds traded with a hint of a bid tone, with yields fractionally lower along the curve.

Australian government bond futures were higher, with the three-year bond contract up 2 ticks at 98.160, and the 10-year contract 2.5 ticks higher at 97.5250.

REUTERS

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