The Australian dollar extended its early rally against its major counterparts in European deals on Friday, after the People’s Bank of China unexpectedly lowered interest rates and reserve ratio, as policy makers grapple with deepening economic slowdown in the world’s second-biggest economy.
The People’s Bank of China cut the one-year lending rate and deposit rate by a quarter-point to 4.35 percent and 1.5 percent, respectively. This was the sixth reduction since November last year.
Previously, the bank lowered the interest rates by 25 basis points in August.
Global stocks and commodities rallied following the PBOC easing, which is Bejing’s latest attempt to kick start its slowing economy.
The currency has been firmer during the day, as dovish comments from the European Central President Mario Draghi on QE underpinned investor sentiment.
Draghi signaled about a possible stimulus expansion in December as policymakers are increasingly concerned over the deteriorating growth and inflation outlook for the euro area.
The aussie appreciated 1.26 percent to hit a 3-day high of 0.7296 against the greenback, from yesterday’s closing value of 0.7205. The next possible resistance for the aussie-greenback pair may be located around the 0.75 region.
The aussie strengthened to 1.5190 against the euro, its strongest since August 20. This is a 1.39 percent increase from Thursday’s closing quote of 1.5404. Continuation of the aussie’s uptrend may lead it to a resistance around the 1.50 area.
Preliminary figures from a Markit Economics survey showed that Eurozone private sector growth unexpectedly strengthened in October to its fastest pace in two months, led by the surprise improvement in the services activity, while manufacturing expansion held steady.
The flash composite purchasing managers’ index that represents both manufacturing and services rose to a two-month high of 54 from 53.6 in September. Economists had expected a score of 53.4.
Bouncing off from its prior 5-1/2-month low of 1.0572 against the NZ dollar, the aussie edged up to 1.0715. The aussie is seen finding resistance around the 1.075 mark.
The aussie firmed to 10-day highs of 0.9536 versus the loonie and 88.10 against the yen, from Thursday’s closing values of 0.9432 and 86.97, respectively. On the upside, the aussie may challenge resistance around 0.975 against the loonie and 92.00 against the yen.
The material has been provided by InstaForex Company – www.instaforex.com