The booming Australian housing market and the RBA keeping the official cash rate at 2.5 per cent are keeping the dollar buoyant.
The Australian dollar has briefly broken above US95¢ overnight for the first time in about eight months, after overseas investors cheered the Reserve Bank’s decision to keep rates on hold, ahead of important trade figures due out today, which are expected to show the country’s trade deficit has widened.
The local currency was buying US94.96¢ at 7am AEDT, compared with US94.58¢ on Tuesday. But after the close of the Australian share market, the currency pushed above US95¢, where it stayed for most of the night before easing.
A higher read for Australian house prices and the RBA keeping the official cash rate at 2.5 per cent, as well as reaffirming its stance on monetary policy was supportive of the Aussie dollar yesterday.
The local currency could find added support in Australia trade data as the rising volume of exports comes on stream, suggesting more offshore investors are having to buy the local currency, and therefore leading to a widening of the trade deficit.
The consensus is for the trade deficit to widen to $200 million in May, from $122 million.
But National Australia Bank expects a flat reading, with the trade figures to be balanced out by falling commodity prices and sees further downside for the local currency after the RBA’s assistant governor Guy Debelle speaks this evening in London and may present offshore investors with a softer outlook for the Australian economy.
The other big ticket events that is likely to move the currency will be a speech by Federal Reserve chair Janet Yellen tonight.
If Ms Yellen is less optimistic about the US economy and in particular, growth in the labor market, this could push the US dollar lower against its major pairs, and support the Australian dollar.
The last time the Australian dollar traded in the US95c range was in November last year.