The Australian dollar has started the week on a softer note, after a stronger-than-expected US jobs report and weaker Chinese trade data pushed the currency lower by almost one cent.
The local currency, which had traded as high as US91.33¢ on Friday, slipped below US90.40¢ on Monday morning. It was buying US90.58¢ about 11am.
The US payrolls data, released on Saturday morning, showed an increase of 175,000 jobs in February, above economists' forecasts. The improved report, in spite of severe winter conditions, saw the US dollar strengthened against a range of currencies. The employment increase also boosted expectations that the US Federal Reserve would continue to taper its stimulus program.
The weaker Chinese data, which was driven by a surprise fall in exports, revived concerns about the strength of the world's second economy. The central government set a growth target of 7.5 per cent for 2014 last week - the same target it has set for the last two years.
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The Australian dollar has been the fourth-biggest gainer against the US currency this year among G10 countries, and has risen 1.6 per cent against the greenback since the start of 2014.
Last week, the currency rose by 1.6 per cent against the US dollar after two consecutive weeks of 0.6 per cent declines. The Australian dollar had been boosted by a jumped in fourth-quarter growth, which took the year-on-year GDP rate to 2.8 per cent.
"It was a strong week for the Australian dollar last week on a truckload of strong data - GDP, exports, retail sales - and the RBA Governor on Friday at his semi-annual testimony noted that he did not see a case for easing at this point in time," TD Securities head of Asia-Pacific research Annette Beacher said.
She added the Chinese trade data was "clearly distorted" by the Chinese New Year festive season, which started in late January.
Investors are turning their attention to the February labour market report, which will be published by the Australian Bureau of Statistics on Thursday. Economists are tipping the jobless rate to remain at a decade-high of 6 per cent, with 15,000 jobs added to the economy.
The Reserve Bank of New Zealand is set to release its monetary policy decision for March on Thursday. A rise in the cash rate could boost the New Zealand dollar at the expense of the Australian currency.
At the same time, an improvement in US retail sales data and consumer confidence, which will be published on Thursday and Saturday respectively, could also weigh on the Australian dollar, FXCM currency strategist Ilya Spivak said.
Commonwealth Bank of Australia currency strategist Peter Dragicevich said he expected the Australian dollar to soften slightly this week on the jobs report. Weaker-than-expected Chinese data released this week, which include figures on new loans, money supply, retail sales and industrial production, could also see the dollar trade lower.
Over the medium-term, the US dollar was expected to strengthen as the Fed's stimulus reduction continues, Mr Dragicevich said.
"In terms of the Fed, it's right to look through the noise of the weather. Given the guidance a lot of the Fed speakers have come out with, it will take a change in their medium-term outlook to stop tapering. I don't think that's going to be the case when they meet next week.
"It's likely they will just maintain their course and do another $US10 billion step-down and continue to stress that if it more than just the weather, they will need to reassess. I think everyone is just looking for the US data to bounce back in the second quarter."
Source:- smh.com.au
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