The Australian dollar retreated from its recent highs against the other major currencies in the Asian session on Wednesday, following comments by the Reserve Bank of Australia Governor Glenn Steven that signaled the possibility of a further rate cut this year.
Speaking at the Anika Foundation Luncheon in Sydney, Stevens said that a further cut in rates remains on the table.
Stevens also said that a lower Australian dollar was necessary for the economy.
Stevens said, “A period of somewhat disappointing, even if hardly disastrous, economic growth outcomes, and inflation that has been well contained, has seen interest rates decline to very low levels.”
“The question of whether they might be reduced further remains, as I have said before, on the table,” he added.
The currency retreated earlier after the nation’s consumer prices rose less than expected in the second quarter of 2015.
Data from the Australian Bureau of Statistics showed that the consumer prices in Australia added 0.7 percent on quarter in the second quarter of 2015. That was shy of forecasts for 0.8 percent and up from 0.2 percent in the first quarter.
On a yearly basis, inflation added 1.5 percent, also beneath expectations for 1.7 percent but up from 1.3 percent in the three months prior.
However, the Reserve Bank of Australia’s trimmed mean was up 0.6 percent on quarter, matching forecasts and down from 0.7 percent in the previous three months.
On year, the trimmed mean gained 2.2 percent, exceeding forecasts for 2.1 percent and down from 2.3 percent in the first quarter.
In other economic news, data from Westpac Bank showed that a leading index for the Australian economy showed no change in June, posting a flat reading. That follows the 0.1 percent decline in May.
Also, data from the Conference Board showed that a leading economic index for the Chinese economy was up 1.0 percent in June. That follows the 1.1 percent increase in May and the 1.5 percent spike in April.
Meanwhile, Asian stock markets are mostly in negative territory, tracking the weak lead from Wall Street overnight and as investors resorted to profit taking following recent strong gains. The Australian market is also lower, reflecting weakness in banks and mining stocks.
Tuesday, the Australian dollar rose 0.68 percent against the U.S. dollar, 0.47 percent against the yen, 0.38 percent against the euro and 0.47 percent against the Canadian dollar.
In the Asian trading, the Australian dollar fell to a 6-day low of 1.4823 against the euro, from an early high of 1.4723. At yesterday’s close, the aussie was trading at 1.4734 against the euro. On the downside, 1.51 is seen as the next support level for the aussie.
Pulling away from an early high of 92.00 against the yen, the aussie edged down to a 2-day low of 91.19. The pair was quoted at 91.90 at yesterday’s close. The aussie may test support near the 89.00 region.
Against the U.S., the New Zealand and the Canadian dollars, the aussie dropped to 0.7372, 1.1139 and 0.9556 from early highs of 0.7438, 1.1216 and 0.9624, respectively. The aussie closed yesterday’s deals at 0.7418 against the greenback, 1.1193 against the kiwi and 0.9603 against the loonie. If the aussie extends its downtrend, it is likely to find support around 0.73 against the greenback, 1.06 against the kiwi, 0.94 against the loonie.
Looking ahead, the Bank of England will publish the minutes of its July monetary policy committee meeting.
In the New York session, U.S. house price index for May and existing home sales data for June are slated for release.
The material has been provided by InstaForex Company – www.instaforex.com