The Australian dollar moved lower against its US counterpart on Tuesday. The upbeat Australian data and dovish comments by a Federal Reserve official seemed to not be able to help the fate of this commodity-related currency.
On Monday, Fed officials Lockhart, Kashkari and Brainard made their separate speeches. Lockhart has already announced his stance on the issue of rate hikes this month, and it has helped boost the dollar before. Again, he said that the economic data of late justifies a lively conversation about whether to raise rates. But people are perhaps more interested in listening to what Fed Governor Lael Brainard has to say, as she is such an influential voice.
In her dovish speech, Brainard sent the greenback under pressure after warning against raising interest rates too quickly. She said economic progress continues in the US, but the Fed would be wise to continue keeping policy loose and a weak currency. This comment was after Boston Fed President Eric Rosengren said on Friday that low interest rates are increasing the chance of overheating the US economy.
Fed President Lockhart doesn’t get to vote until 2018, and people are drawn mostly to Brainard’s remarks as the Fed enters a communication blackout period ahead of the FOMC’s next meeting on September 20-21 as a key dove who has in the past been able to convince Fed Chair Janet Yellen to hold off on raising rates.
Despite Brianard’s dovish remarks, the US dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.08% at 95.20.
Australian Data and Crude Oversupply
National Australia Bank reported business confidence for August rose to plus-6, compared with the previous survey at plus-4. Its business survey also fell to plus-7 from the previous reading at plus-8. Also, seeing as how the commodity currency Aussie is sensitive to sentiments, it is fragile as oil prices moved lower after the Organization of the Petroleum Exporting Countries said on Monday that crude output from rival producers is stronger than expected and will result in a bigger oversupply than previously believed this year and even until the next.
Despite this, Australia’s currency has not fallen as much as expected in response to cuts in interest rates that have taken the cash rate to a record low 1.5%, Reserve Bank of Australia assistant governor Christopher Kent said Tuesday.
AUD/USD is trading from 0.7566 to 0.7504, currently testing the resistance at 0.7569, which was the support on September 9. It was also when the pair plunged down this level, and trying to presently recover from. The trade is within Aussie’s 50-day and 100-day SMA.
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