Forex: AUD/USD – Australian dollar shedding gains in European session

on Jul 22, 2013
Listen Monday July 22th: The pair was at 0.9233 just before the opening in Europe, after climbing during Asian trading, but has since declined to 0.9185. Market speculation continues to influence the movements of both currencies in this pairing.

Last week, US Fed Chairman ben Bernanke said the economic recovery was continuing at a moderate pace but reiterated that monetary policy will remain accommodative for the foreseeable future. As for the AUD, analysts have been suggesting for some time now that the Reserve Bank of Australia will cut its benchmark interest rate by 0.25 percent its next meeting in August.

The central bank on 3 July left its cash rate target at 2.75 percent for the second month in a row. The bank has lowered rates seven times since late 2011 in the hope that lower borrowing costs would drive up consumer spending on homes and in shops.
“We will be able to continue to do our part, consistent with our mandate, to assist the transition in sources of demand that is needed,” Glenn Stevens, governor of the Reserve Bank of Australia, said in a speech to economists earlier this month. He added, “We will do what can reasonably be done.If the economy needs a lower exchange rate, it will probably get it.”

Australia’s dollar firmed on Friday when the People’s Bank of China removed a floor on borrowing costs previously set at 30 percent below the benchmark rate, boosting prospects for a leg-up for Chinese growth and flow-on support for the Australian economy.
Another of Australia’s major trading partners – Japan – showed continuing signs of economic improvement in the first quarter of 2013. And with prime minister Abe’s ruling coalition taking control over the upper house yesterday, the prospects increase of a further weakening in the yen Abe stressed today that he and his government will remain focused on defeating deflation.


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