The Aussie extended gains against the US dollar for a third day on Wednesday, as investors continue to speculate that the US Federal Reserve (Fed) will continue to cut its monthly bond purchases further which will strengthen the greenback.
The currency pair climbed 0.37% to $0.8807 at the time of writing, after reaching $0.8825 earlier in the session. The Australian dollar touched 86.60 on Jan 24, the lowest since July 2010. Australia’s ten-year government bond yield added nine basis points to 4.12%, after dropping to a low 4.02%; the lowest since Oct 31.
Federal Reserve Meeting
Members of the Federal Open Market Committee (FOMC) are meeting up later today to continue the two-day policy meeting.
Market analysts are predicting members of the Federal Open Market Committee will continue to reduce its monthly bond purchases by $10 billion at every meeting to end the stimulus program by this year, despite the recent disappointing non-farm payrolls data for the previous month.
In the last fed-meeting, the central bank decided to reduce its monthly bond purchases by $10 billion to $75 billion a month. Minutes for the Federal Open Market Committee (FOMC) meeting will be released on Wednesday.
Australian Data
Reports released revealed the National Australia Bank Business Confidence Index stood at 6 in December, after the previous month’s reading was up from 5 to 6.
The same report revealed the Australian business conditions rose by seven points to 4; the highest since March 2011, from -3 recorded in November.
“Business conditions recorded a surprising jump to a more than a 2.5-year high in December – cementing the upward trend seen over recent months – supported by the low interest rate environment, higher asset prices and less elevated Australian dollar,” the NAB commented.
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