The Australian dollar weakened against the other major currencies in the Asian session on Wednesday following a speech by Reserve Bank of Australia Governor Glenn Stevens.
Speaking at the Economic Society of Australia in Brisbane, Stevens said that the Australian dollar is expected to depreciate further. He also noted that the RBA is open to the possibility of further easing in order to maintain growth.
“We remain open to the possibility of further policy easing, if that is, on balance, beneficial for sustainable growth,” he said.
“Inflation is likely to remain low. Growth in labour costs is very low and some of the forces that were pushing up certain administered prices have started to reverse. So even if the exchange rate were to fall further, which in my view it needs to, we seem unlikely to have a problem with excessive inflation, ” he added.
Meanwhile, Ratings agency Moody has revised its outlook on Western Australia’s Aa1 credit rating outlook to negative. The move also weighed on the currency.
“The rapid rise in iron ore and other royalties, as commodity prices spiked to record highs in 2013, along with adjustments to the royalty rate, pushed up the state’s reliance on this volatile source of revenue,” Moody’s said.
The currency came under pressure earlier on the back of weak consumer confidence data.
Data from Westpac Bank and the Melbourne Institute showed that consumer confidence in Australia tumbled in June, erasing all of the positive sentiment that was garnered in the previous month, with the release of the latest government budget.
The Westpac index sank 6.9 percent in June to a score of 95.3, the bank said. That follows the 6.4 percent spike in May to 102.4.
Tuesday, the Australian dollar showed mixed trading against the other major currencies. While the Australian dollar rose against the U.S. dollar, the Yen and the Canadian dollar, it fell against the euro and the NZ dollar.
In the Asian trading today, the Australian dollar fell to 1.4765 against the euro for the first time since February 13. At yesterday’s close, the aussie was trading at 1.4668 against the euro. If the aussie extends its downtrend, it is likely to find support around the 1.49 area.
Against the Canadian dollar, the aussie slipped to 0.9435 for the first time since April 24. The pair was quoted at 0.9483 at yesterday’s close. On the downside, 0.93 is seen as the next support level for the aussie.
The aussie dropped to 8-day lows of 95.12 against the yen and 1.0710 against the NZ dollar, from yesterday’s closing quotes of 95.61 and 1.0773, respectively. The aussie may test support near 93.10 against the yen and 1.03 against the kiwi.
Against the U.S. dollar, the aussie slid to a 2-day low of 0.7640 from yesterday’s closing value of 0.7689. The aussie is likely to find support around the 0.75 region.
Looking ahead, U.K. industrial and manufacturing production for April is due to be release at 4:30 am ET.
In the New York session, U.S Federal budget statement and U.K. NIESR GDP estimate, both for May, are slated for release.
At 4:00 pm ET, Bank of England Governor Mark Carney and U.K. Finance Minister George Osborne are expected to speak at the Mansion House event in London.
The material has been provided by InstaForex Company – www.instaforex.com