AUD/USD trades steadily close to over three-year lows as the Federal Reserve decides to taper

Australian dollar traded steadily and in proximity to more than three-year lows against its US counterpart on Thursday, following Feds decision to reduce the scale of its monthly asset purchases at the policy meeting on Wednesday.

AUD/USD reached a session low at 0.8823 at 3:25 GMT, also the pairs lowest point since August 25th 2010, after which consolidation followed at 0.8858, dipping 0.02% for the day. Support was likely to be found at August 25th 2010 low, 0.8772, while resistance was to be encountered at December 18th high, 0.8944.

At its policy meeting ended yesterday the Federal Reserve Bank decided to leave its benchmark interest rate range unchanged at 0.00%-0.25%, but said that it introduces a reduction of its monthly monetary stimulus by 10 billion USD to 75 billion USD since January.

“If incoming information broadly supports the Committees expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings”, according to central banks policy statement.

“However, asset purchases are not on a preset course, and the Committees decisions about their pace will remain contingent on the Committees outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases”, the bank added.

“The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5% percent, especially if projected inflation continues to run below the Committees 2% longer-run goal”, according to the statement.

Meanwhile, as Fed decided to taper, speculation appeared that the Reserve Bank of Australia (RBA) may need to reduce borrowing costs further in order to spur economic growth. Traders saw a 30% probability that the benchmark interest rate will be below the current record-low level of 2.50% by the end of April, according to swaps data compiled by Bloomberg.

The yield on Australian 10-year government bonds rose four basis points, or 0.04 percentage point, to reach 4.27%, poised for the most considerable gain since December 5th. The yield on nations three-year bonds climbed five basis points to reach 2.94%, after touching the lowest level since October 1st at 2.87% on Wednesday.

Analysts participated in a survey by Bloomberg News project that Australian dollar will end next year at 88 U.S. cents.

Elsewhere, the Aussie was lower against the euro, with EUR/AUD cross gaining 0.19% on a daily basis to trade at 1.5478 at 7:57 GMT. AUD/NZD pair was advancing 0.52% to trade at 1.0817 at 8:00 GMT. A report showed earlier that the Gross Domestic Product of New Zealand expanded 1.4% during the third quarter of the year compared to the preceding quarter, marking the fastest pace since 2009. In Q2 compared to Q1 the figure rose 0.3%. Annualized GDP climbed 3.5% in Q3, after a 2.5% gain in the second quarter.

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