Stevens no longer opting for weaker Aussie

Monday, Dec 21 2015

There were no major data releases from Australia this morning. The Australian dollar was offered support in Friday's offshore trade from gains in commodities, excluding oil, and the generally softer U.S. dollar which fell in line with U.S. stocks, National Australia Bank global co-head of FX strategy Ray Attrill said in his morning note.

For the first time in years Glenn Stevens probably won’t be asking for a weaker Australian dollar for Christmas. “I suspect Governor Stevens will be quietly pleased to see the fall in the Aussie after the FOMC, given how many times he must have been warned that the hike was factored into the Aussie already,” said Sean Callow, a foreign-exchange strategist in Sydney at Westpac Banking Corp.

“It seems the period of jawboning is behind us. He seems willing to trust the markets to resume selling Aussie if commodities remain weak.” The boost from a weaker currency is increasingly important for Australia’s economy as sliding commodity prices hurt corporate and government revenues at a time when the RBA is seen by some analysts as reluctant to lower its benchmark rate from a record low.

The currency’s 31 percent depreciation over the past three years has already helped to boost sectors from manufacturing to tourism and education, underpinning jobs growth that has pushed the unemployment rate down to 5.8% from a January peak of 6.4%. “Stevens has gone a little quiet on the Aussie, but I think he would be happy it is falling and would be hoping for further weakness,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia in Sydney. “I can see Aussie falling to 67 to 69 cents in the first half of 2016.”

Aussie is currently being traded around 0.7170 area. Pair is likely to find support around 0.71 handle and resistance above 0.72 level. There will be no major data releases in the rest of the session.

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