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Australian dollar treads water, kiwi near 6-week high as US election looms

Friday, November 4, 2016 - 12:49

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The Australian dollar was steady on Friday even after gains in each day of the week failed to move it over the 77 US cents hurdle, which is proving to be tenacious chart resistance.

[SYDNEY] The Australian dollar was steady on Friday even after gains in each day of the week failed to move it over the 77 US cents hurdle, which is proving to be tenacious chart resistance.

The Aussie was down 0.04 per cent at US$0.7680, and is set for its best weekly show since Sept 23, having risen more than one per cent so far this week.

A close above US$0.7734 technical resistance will likely trigger a rally in the Aussie.

Earlier, the Reserve Bank of Australia (RBA) gave an upbeat assessment of the economy as a rebound in commodity prices boosted the country's terms of trade while retail sales rose a solid 0.6 per cent in September.

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That has bolstered speculation that the RBA's five-year long easing campaign is all but done, briefly pulling the Aussie higher.

"The RBA's statement reinforces the impression that the RBA's bias on interest rates is neutral for now," said Shane Oliver, chief economist at AMP Capital.

"Short of a shock, it's hard to see the RBA cutting interest rates at its December meeting."

However, Mr Oliver added the US elections remained a key risk for financial markets with Democrat Hillary Clinton and Republican Donald Trump neck and neck in some opinion polls days ahead of the Nov 8 presidential election.

A Trump victory is likely to unnerve financial markets due to a high degree of uncertainty about his policies on trade, foreign policy and immigration, while Mrs Clinton is seen as a candidate of the status quo.

The currency market was also looking to US non-farm payrolls report due later in the day, which could impact expectations for the Federal Reserve Elsewhere, the Aussie fell on the British pound after Britain's High Court ruled that the government needed parliamentary approval to trigger procedures to leave the European Union, easing Brexit fears for the time being.

The New Zealand dollar slipped 0.5 per cent to US$0.7308, within kissing distance of a six-week high hit in the previous session.

The kiwi is already up 2 per cent this week, on track for its best weekly performance in more than three months.

The kiwi comfortably cleared chart resistance around US$0.7300, and was now targeting US$0.7370 as the next hurdle, driven by US dollar weakness and a strong domestic economy.

Analysts expect the central bank to ease next week as it looks to temper a rising currency and stoke inflationary pressures.

New Zealand government bonds eased, sending yields five basis points higher along much of the curve.

Australian government bond futures eased, with the three-year bond contract down four ticks at 98.30. The 10-year contract slipped 4.6 ticks to 97.68.

REUTERS

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