Australian dollar rose for a fifth day on Tuesday against the US peer, reaching levels unseen since June, following the release of the minutes of Reserve Bank of Australias (RBA) meeting on October 1st and as stock markets signaled optimism that US Senate debates on raising the country’s debt ceiling were moving closer to a deal.
AUD/USD hit a session high at 0.9539 at 3:45 GMT, also the pairs highest point since June 19th, after which consolidation followed at 0.9533, rising 0.47% for the day. Support was likely to be found at October 10th low, 0.9390, while resistance was to be encountered at June 19th high, 0.9557.
Senate Democratic and Republican leaders said on Monday that a significant progress toward an accord has been made. The approached agreement would suspend the US debt ceiling through February 7th 2014, provide government funding through January 15th and also require a House-Senate budget conference by December 13th, according to an anonymous Senate source familiar with the debates. However, if an agreement is not reached, the nations authority to borrow will lapse on October 17th. The Congressional Budget Office said that the government would begin missing payments between October 22nd and October 31st.
The MSCI Asia Pacific Index of shares climbed 0.3%. “Equity markets, a barometer of risk sentiment, are taking an optimistic stance that a deal will be agreed to soon,” said Imre Speizer, a market strategist at Westpac Banking Corp. (WBC) in Auckland, cited by Bloomberg. “Riskier currencies like the Aussie and kiwi and, to a lesser extent, the euro, will rise against the dollar in the event of a deal being done.”
Meanwhile, according to the RBA minutes, policymakers agreed that the bank should again neither close off the possibility to cut the benchmark rate further, nor signal an imminent intention to reduce it. In addition, the minutes stated that despite the recently recorded gains, the Australian dollar still remained about 10% below its highest point, registered in April.
Traders saw a 22% probability that the central bank will lower borrowing costs from the current record low level of 2.50% by the end of 2013, while a month ago the odds of such an action were 37%, according to swap data by Bloomberg News.
The RBA maintained its benchmark interest rate unchanged at its most recent meeting, as it has reduced rates by 225 basis points since late 2011.
Last but not least, a report showed earlier today that new auto sales in Australia dropped 0.1% in September on a monthly basis and 3.5% on annual basis. In August compared to July sales rose 0.7%, while in August 2013 compared to August 2012 the indicator added 0.2%.
Elsewhere, the Aussie was gaining ground against the euro, with EUR/AUD cross down 0.51% on a daily basis to trade at 1.4222 at 6:55 GMT. AUD/NZD pair rose 0.19% to trade at 1.1380 at 6:57 GMT.