Tuesday, September 1, 2009

Australian Dollar Down As RBA Hike Expectations Moderate

Capurso said he expects the local currency will hold the US$0.8370 to US$0.8420 range ahead of the employment numbers but a smaller-than-expected decline in employment could return the unit back to above the US$0.8450 level.
Earlier Friday, the RBA's monetary policy statement prompted an immediate spike in the currency up to a peak of US$0.8423, although the Aussie almost as quickly dropped to a session trough of US$0.8368.
Deutsche Bank Foreign Exchange Strategist John Horner said that the pullback in the currency likely reflected more benign upgrades in the RBA's gross domestic product and inflation forecasts than initially expected.
While the RBA is now quite explicit about the need to return the cash rate to "more normal" levels, Horner said that the statement implied "the RBA is not in any great rush to move toward those more normal settings."
Interbank cash rate futures show market participants now expect 23 basis points of rate hikes by November, down from 25.5 basis points late Thursday.
Australian bond futures were modestly stronger as investors maintained their positions ahead of the U.S. labor data and were helped slightly by a paring back of rate hike expectations.
September three-year bond futures were four ticks higher at 94.89 while 10-year futures were up three ticks at 94.37.

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