Australian dollar edges lower as investors refocus

We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.

Advertisement

This was published 9 years ago

Australian dollar edges lower as investors refocus

By Mark Mulligan

The Australian dollar edged slightly lower on Monday as investors’ focus shifted from the long-term fallout from last week’s Malaysia Airlines tragedy to expectations of broadly in-line quarterly inflation figures this week.

In late local trade, the Aussie was worth US93.91¢, against Friday’s close of US93.95¢. After an initial spike above US94¢ as it recovered from the aftermath of the missile strike on the ill-fated flight, the Aussie has stayed mainly between US93.80¢ and US94¢.

Despite widespread condemnation of the attack, and the geopolitical repercussions of Russia’s response to the downing of the aircraft, financial markets have quickly discounted any economic consequences.

“Certainly people were shocked when the plane was first shot down, and we saw a pretty dramatic reaction in global markets,” Westpac currency strategist Sean Callow said.

“Since then, while markets see this is a huge geopolitical event and human tragedy, they do not perceive it as a pivotal economic event.”

At home, currency watchers remain focused on a speech on Tuesday by Reserve Bank of Australia governor Glenn Stevens and Wednesday’s release of the consumer price index for the June quarter.

Analysts say though the annual pace of the CPI may have lifted above the top of the RBA’s 2-to-3 per cent target band in the second quarter, underlying trends point to moderation in the second half of this year and into 2015.

This is due to “subdued domestic demand, upward pressure on the unemployment rate and continued weak wages growth”, Macquarie said in a note on Monday.

Currency markets have already priced in the chance of further monetary easing by the RBA, and only a much lower than expected CPI figure would put heavy downward pressure on the dollar. This happened last week in New Zealand, when surprisingly low in­flation data drove the Kiwi down about US1.5¢.

A speech by Mr Stevens at an Anika Foundation fundraiser on Tuesday will be closely watched for any further attempts by him to talk down the Aussie following his surprise “jawboning” early this month. Although some RBA-watchers say he may steer away from any direct attempts to influence the dollar’s value, others are looking for references by him to its divergence from fundamentals.

The US dollar will also be back in the spotlight this week as a range of manufacturing and other data is released. Any further signs of an acceleration in economic recovery could push the greenback up against the Aussie, ­analysts say.

Currency markets have already priced in the chance of further monetary easing by the RBA, and only a much lower than expected CPI figure would put heavy downward pressure on the dollar. This happened last week in New Zealand, when surprisingly low in­flation data drove the Kiwi down about US1.5¢.

Most Viewed in Business

Loading