Australian dollar trimmed its gains against the US counterpart on Wednesday, as market participants remained wary ahead of congressional testimony by FED Chairman Ben Bernanke later today, while a speculation appeared that Reserve Bank of Australia may reduce interest rates to a record low at its meeting next month.
AUD/USD slid to a session low at 0.9201 at 6:44 GMT, after which consolidation followed at 0.9206. Support was likely to be found at July 16th low, 0.9091, while resistance was to be met at June 27th high, 0.9339.
“There are still some downside risks for the Aussie,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd., cited by Bloomberg. “There’s a number of factors supporting that – the RBA is talking the currency down, the prospect for another rate cut, and additionally the uncertainty around China.”, he also added.
Experts believed there was a 50% chance that the Reserve Bank of Australia will reduce the base interest rate from an all-time low by 0.25% to 2.50% at its meeting next month.
Additionally, the Conference Board group said that Chinese Leading index climbed by 1.0% in June, reaching a reading of 263.8, as 4 out of 6 components, comprising the index, advanced and supported the overall result. China is Australias largest trading partner. At the same time, the Melbourne Institute Leading Index rose by 0.2% in May, below the rate of increase in the preceding month, 0.7%, which was a revision up from 0.6% previously. Both indicators caused little influence on the AUD/USD pair though.
Meanwhile, FED Chairman Ben Bernanke is expected to deliver his semi-annual monetary-policy testimony on July 17-18th. He said in June that the central bank may begin to taper its 85 billion USD in monthly asset purchases by this year’s end and exit the stimulus program in mind-2014, if US economic growth meets policymakers’ objectives. Bernanke also said on July 10th, that the US economy was in need of a highly accommodative monetary policy for the foreseeable future, after which the greenback sank against its major peers.
Australian dollar traded lower against the euro, with EUR/AUD cross up by 0.29% to reach 1.4268. The Aussie has erased 9.1% during the past three months, which is the worst performance among 10 developed-nation currencies, tracked by Bloomberg Correlation Weighted Indexes.
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