Australian dollar was trading higher against its US counterpart on Friday, following the decision by the Federal Reserve Bank to leave monetary stimulus unchanged on Wednesday.
AUD/USD reached a session high at 0.9457 at 6:09 GMT, after which consolidation followed at 0.9454, gaining 0.15% for the day. Support was likely to be received at September 13th low, 0.9224, while resistance was to be encountered at June 19th high, 0.9557.
Riskier assets, including the Aussie, received a boost after on Wednesday the Federal Reserve Bank abstained from introducing a change in its stimulus program of 85 billion USD per month. This decision underscored Chairman Ben Bernanke’s willingness to do anything to lower unemployment and pushed back market expectations for a tightening of policy. Bernanke said at the press conference after the FOMC meeting, that the central bank must determine its policies based on “what’s needed for the economy,” even if it surprises global markets. He was also “somewhat concerned” by the influence of rising bond yields on the economy and was willing to “wait a bit longer and to try to get confirming evidence” that economy is showing signs of lasting improvement. As a result the greenback was pressured, interest rates in the United States were lowered and higher-yielding currencies, such as the Australian dollar, appeared to be more appealing to investors.
Meanwhile, 10-year Australian bond yields climbed 6 basis points to 3.94%, reducing the weekly decline to 15 basis points. 3-year yields gained 4 basis points to reach 2.81%, having decreased 10 basis points since September 13th. Australian government will sell a new 2035 inflation-linked note via banks, the government funding arm said today in an e-mailed statement, according to Bloomberg. The issue is expected to be the longest-maturity note since the offering back in 1996 of indexed securities due in 2020.
Traders saw a 48% probability that the Reserve Bank of Australia will cut its benchmark interest rate from the current record low level of 2.5% by April 2014.
National Australia Bank Ltd. revised up its forecasts on the Australian currency, stating that the AUD/USD cross will finish this year at 0.9200, in comparison with its previous estimate of 0.8600.
Elsewhere, the Aussie was poised for a fourth weekly drop against the New Zealand dollar, as AUD/NZD cross was losing 0.05% to trade at 1.1268 at 6:57 GMT. EUR/AUD pair was down by 0.06% for the day to trade at 1.4323 at 6:58 GMT.
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