The Australian dollar remained slightly unchanged over the weekend after posting losses last week after the Reserve Bank Governor Glenn Stevens commented that the currency is overvalued, while U.S. labor market posted impressive results last week. As of 0630 in Sydney on Monday 7th, the Aussie was going for 93.66 U.S. cents, up from Friday’s close of 93.53 cents.
Mr. Stevens, who addressed economists and analysts in Hobart in Tasmania, also hinted that exporters were uncomfortable with the stronger Aussie and that the central bank had various options to reduce rates further. This shaved off at least half a U.S. cents on the currency’s intraday value, according to Wall Street Journal.
The Aussie plunged to a low of US$0.9362, a far cry from US$0.9506, the highest level in eight months that it touched early last week as investors reacted to RBA comments that the economic recovery was gaining momentum despite a slowdown in mining investment.
The Australian dollar nosedived on Wednesday after a report indicated that trade deficit unexpectedly rose, indicating a slowdown in the mineral resources-driven economy.
“Has the RBA reinstated an easing bias? Possibly,” Scott Haslem, a Sydney-based economist at UBS told WSJ last week. “Given the RBA’s comment that they still have ‘ammunition’ on rates, it would seem a fair assessment, that given the right conditions … the RBA would be more likely to be easing rates than raising them over coming months.”
The central bank has tried to balance the mining lull by directing its efforts towards boosting expansion of other economic sectors such as manufacturing, retail and housing construction. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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