Australian Dollar Recovers After RBA Governor Stevens Testimony

01:02, 20th August 2014

(RTTNews) - The Australian dollar recovered from its early lows against the other major currencies in the Asian session on Wednesday after Reserve Bank of Australia governor Glenn Stevens gave his semi-annual testimony to parliament.

In his opening statement to the House of Representative Standing Committee on Economics, in Brisbane, Stevens signaled that there will be recovery in the Australian economy, if the central bank persists with the low cash rate.

Mr. Steven's said that the economy is healing as non-mining activity is growing outside the mining boom. The Australian dollar will fall and that there's no need to intervene just yet to push it lower, he added.

The RBA expects inflation to be consistent with the 2 to 3 per cent target bank over the horizon relevant for monetary policy in the near term. "The removal of the price on carbon will lower inflation temporarily over the coming year," he said.

Some encouraging signs on sentiments was also seen that the nation was perceived as attractive by international investors, partly because other countries were less attractive, he said.

In the economic news, data from the Westpac Bank/Melbourne Institute showed that the Australian economy remained slightly below trend in July, with the leading economic indicators index -easing 0.1 percent on month. That follows the 0.1 percent increase in June.

The Australian dollar, which was under pressure amid Steven's testimony, recovered thereafter.

The Australian dollar recovered to a 9-month high of 1.1081 against the NZ dollar and nearly a 2-week high of 1.0192 against the Canadian dollar, from early lows of 1.1020 and 1.0159, respectively. At yesterday's close, the aussie was trading at 1.1041 against the kiwi and 1.0176 against the loonie. If the aussie extends its uptrend, it is likely to find resistance around 1.11 against the kiwi and 1.02 against the loonie.

Against the U.S. dollar and the euro, the aussie edged up to 0.9316 and 1.4290 from a 6-day low of 0.9295 and a 2-day low of 1.4341, respectively. The aussie closed yesterday's deals at 0.9301 against the greenback and 1.4311 against the euro. Continuation of the bullish trend may lead the aussie to a resistance around 0.937 against the greenback and 1.42 against the euro.

Moving away from an early low of 95.61 against the yen, the aussie rose to 95.87. The pair was quoted at 95.71 at yesterday's close. On the upside, 96.00 is seen as next resistance level for the aussie.

Looking ahead, Japan all industry activity index for June is due to be released in the Asian session.

In the European session, German producer price index for July is due.

In the New York session, Canada wholesale sales data for June is due to be released.

At 2:00 pm ET, U.S. Federal Reserve will release the minutes from the July 29-30 Federal Open Market Committee Meeting.