Australian dollar traded lower against its US rival on Wednesday amid speculation that the Federal Reserve Bank may proceed with its plans to taper stimulus, as markets awaited the release of the minutes of Feds most recent policy meeting.
AUD/USD touched a daily low at 0.8902 during the early phase of Asian trade, after which consolidation followed at 0.8922, dipping 0.05% for the day. Support was likely to be received at January 7th low, 0.8894, while resistance was to be met at January 7th high, 0.8968. The Aussie has depreciated 14% against the US dollar in 2013, or the largest decline after the Japanese yen among the group of ten developed-nation currencies.
Australian dollar remained under pressure ahead of the release of the minutes of Federal Reserve Banks policy meeting on December 17th-18th, when the bank decided to begin scaling back its asset purchases.
“Fed policy and a stronger U.S. dollar will likely drive the Aussie lower,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney, cited by Bloomberg News. “There’s a key risk tonight with the minutes. Our view is that there’s enough strength in the U.S. economy to warrant tapering throughout most of 2014.”
In addition, Federal Reserve President for San Francisco John Williams said on Tuesday that quantitative easing will probably end in 2014, in case nations economic recovery develops in line with expectations. The central bank may trim its stimulus in $10 billion increments and exit the program in December 2014, according to the median estimate of experts participated in a poll by the same media.
Later in the day the Automatic Data Processing Inc. (ADP) is to report on employment change in the United States. The report may show that US employers added 200 000 new jobs in December, after a month ago 215 000 job positions were added.
Meanwhile, the Australian Industry Group (AIG) reported earlier today that its Performance of Construction Index (PCI), which measures business conditions among companies operating in the sector of construction, slowed down to a reading of 50.8 in December from a reading of 55.2 in November. Values above the key level of 50.0 are indicative of expansion in the sector.
AIG Group Director, Peter Burn, said that “low interest rates are clearly having their long awaited impact and the continued growth of new orders means that builders – and the manufacturing and service industries that are linked to the commercial and residential construction sectors – can look forward to 2014 with a greater degree of confidence than prevailed only a few months ago.”
Traders saw a 21% probability that the Reserve Bank of Australia (RBA) will introduce a rate cut by its June meeting, according to swaps data compiled by Bloomberg.
Elsewhere, the Aussie was lower against the euro, with EUR/AUD cross up 0.15% on a daily basis to trade at 1.5279 at 7:59 GMT. AUD/NZD pair was trading in proximity to lows unseen in five years. Having touched its lowest point since October 2008 on December 18th at 1.0733, the pair was trading at 1.0780 at 8:00 GMT, dipping a mere 0.02% for the day.
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