Remarks from RBA Deputy Governor boost Aussie

11-26-2009 07:41

The Aussie, an informal term for the Australian Dollar, compensated some of yesterday’s losses on the back of bullish remarks from the RBA Deputy Governor, sturdy construction figures and record gold rates.
At the close of the Australian trading session, the Aussie was trading at $US0.9241, while it closed at $US0.9198 yesterday.

Rate hike speculations

Currency analysts commented that the succession of good news supported the favored market speculations regarding the possible rate hike by 25 basis points to 3.75% next week.
Investors are speculating on a 76% chance that the Reserve Bank of Australia (RBA) will raise interest rates next week. Even so, some investors think that the chance for a rate rise is even greater than 76%.”
Annette Beacher, Senior Strategist TD Securities, stated: “The markets still speculate too cautious with only 74% expecting an additional interest increment of 25 basis points by the Australian central bank next week, while it should be 100%.” On the other hand, in New Zealand the rates are not expected to rise for months, pushing the Australian Dollar up against its New Zealand counterpart, as it rose as far as $NZ1.2725, which is the highest level in more than five months.
The increase was boosted by traders selling to prevent further losses, which resulted in a $NZ1.2700 rate for short positions, according to a currency trader.

RBA Deputy Governor

Positive construction data drove increasing confidence among investors about a possible rate hike by the Reserve Bank of Australia. The report demonstrated that third quarter construction work unexpectedly rose by 2.2% to a record $39.63 billion.
The sturdy construction data added to the upbeat remarks by Ric Battellino, Governor of the Reserve Bank of Australia, who forecasted years of economic expansion boosted by extensive resource investment, a positive household income and increasing population.
The wave of positive data also affected local bond futures, with the three-year contract falling 0.03 points to 95.12, while ten-year bond futures shed 0.05 points to 94.59. At the same time, December bill futures lost 0.04 points reaching 95.89.
The Australian central bank was the first G20 central bank to increase rates in October, due to a strong Australian economy. The next policy meeting will be on December 1.

First time in the history

Next week’s possible rate hike by the RBA would mean a third consecutive month of rate increments, which would be the first time in the history of the Australian central bank. Nevertheless, a minority of currency analysts emphasized the opportunity that the RBA may leave the interest rates unchanged.
Nomura Australia chief economist Stephen Roberts doesn’t believe that the central bank will be cautious to increase rates too soon in case of hampering domestic growth as the worldwide conditions remain weak.
Last week, Roberts suggested the Australian central bank to leave the rates unchanged. “However, economic growth remains limited,” he added.