The Australian dollar has recovered some ground after briefly dipping
below US80c on the back of the European Central Bank economic stimulus
decision.
The currency dropped to a five-and-a-half year low of US79.95c on
Friday morning after losing more than half a US cent overnight following
the unveiling of the European Central Bank’s 60 billion euros ($85bn) a
month stimulus plan.
By 12.00pm (AEDT), the Australian dollar had bounced back to US80.34c, but was still down from US80.66c on Thursday.
The ECB’s bond buying program was a little larger than the 50bn euros a month predicted by some analysts.
LTG GoldRock director Andrew Barnett said the Australian dollar
bounced back because US80c is where traders start buying the currency,
as they don’t think it will fall far below that at the moment.
“There’s a huge support level at US80c for the Australian dollar, but
if the it closes under that for a day or two, with a bit of weakness we
could see US75c in the next six or eight weeks,” he said.
Mr Barnett is confident the Australian dollar will keep falling,
which will stop the Reserve Bank of Australia from cutting the cash
rate.
“Glenn Stevens doesn’t want to put interest rates down – he’d prefer
not to and if the Aussie dollar is going under US80c, drifting towards
US75c I think the RBA will hold fire,” he said.
The Australian bond market was firmer.
At noon, the March 2015 10-year bond futures contract was trading at
97.435 (implying a yield of 2.565 per cent), unchanged from Thursday.
The March 2015 three-year bond futures contract was at 97.960 (2.040 per cent), up from 97.940 (2.060 per cent).
This news story is reprinted from www.businessspectator.com.au
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