Australian Dollar Advances of Signs Central Banks are Supporting Growth

By TraderVox.com

Tradervox.com (Dublin) – Aussie advanced against most of its peers as signs Federal Reserve is supporting growth and Europe is heading closer to solving the debt crisis emerged, spurring demand for higher yielding currencies. The Australian dollar advanced against the yen and the US dollar after the Minneapolis Federal Reserve Bank President Narayana Kocherlakota indicated that the Federal Reserve should continue with its near zero interest rates until the unemployment drops from above 8 percent to below 5.5 percent. The Australian currency also gained after a report in Financial Times indicated that European Union leaders are in talks about a new rescue plan for Spain. The south pacific currency is set for a weekly decline after the International Monetary Fund member indicated that the organization is considering lowering global economic forecast.

According to Jonathan Cavenagh, a Currency Strategist in Singapore at Westpac Banking Corp, the Spain seems to be closer to bailout, which will reduce the tail risks related to the European economic outlook. Further, he pointed out that Kocherlakota’s comments have boosted growth sentiments, which will be positive for the Aussie in the short term. Despite today’s ascent, the Australian dollar is set to register a weekly decline against the US dollar. The New Zealand dollar is set to make a weekly gain against the US dollar.

The Australian dollar is set to decrease by 0.8 percent this week against the US dollar while the New Dollar will increase by 0.1 percent after increasing by 2 percent in the previous week. This comes at a time when the Fed is seen supporting low interest rates as long as inflation remains below 2.25 percent. This week has also witnessed the start of talks among EU leaders and Spanish authorities on ways to start the ECB bond purchasing program according to a report by Financial Times. The results of the discussions are expected to be announced on September 27.

The Australian dollar rose by 0.3 percent yesterday to exchange at $1.0468. The currency was higher by 0.3 percent against the yen, trading at 81.89. The New Zealand currency has added 0.1 percent against the US dollar to exchange at 83 US cents.

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