Australian dollar fell to levels unseen in almost two weeks against its US rival on Tuesday, after Reserve Bank of Australia (RBA) Governor Glenn Stevens suggested there was more room for the Aussie to weaken in the future.
AUD/USD tumbled to a session low at 0.9504 at 4:15 GMT, also the pairs lowest point since October 15th, after which consolidation followed at 0.9511, still losing 0.65% for the day. Support was likely to be received at October 15th low, 0.9499, while resistance was to be met at October 24th high, 0.9671.
Australian dollar lost ground against all of its 16 major peers, as RBA Governor Stevens said that the national currency could be “materially lower” in the future. “The foreign-exchange market is perhaps another area in which investors should take care,” Stevens said today in a speech in Sydney. “It seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today.” Glenn Stevens also said that there would eventually be a scale back of Federal Reserve banks monetary stimulus that tended to devalue the US dollar.
“The Aussie’s dropped on the Stevens comments but it was already under a bit of pressure anyway,” said Tim Kelleher, the head of institutional foreign-exchange sales in Auckland at ASB Bank Ltd., cited by Bloomberg News. “The market got a little carried away on the topside with both the Aussie and kiwi over the last fortnight and we’re now seeing them drift back off.”
The Aussie is seen as about 10% above its average value in the past 10 years, even as the record investment boom in the mining sector eases. RBA has reduced its benchmark interest rate to a record low level of 2.5%, or by 225 basis points since the fall of 2011, while traders saw a 42% probability that banks policymakers will cut borrowing costs again by May next year.
Meanwhile, the Australian currency was lower against the euro, with EUR/AUD cross advancing 0.50% on a daily basis to trade at 1.4480 at 7:24 GMT. It became clear that the index of business confidence in France came in at a reading of 85 in October in consonance with projections. In addition, AUD/NZD pair was losing 0.13% to trade at 1.1525 at 7:25 GMT.