Dollar joins in the Draghi cheer
The Australian dollar closed almost a full US cent higher after the European Central Bank (ECB) revealed a plan to support the region’s weaker economies.
In late local trade, the currency was trading at 103.23 US cents, up from 102.28 cents on Thursday.
CMC Markets foreign exchange dealer Tim Waterer said the ECB news was the main influence on the Australian dollar on Friday, despite disappointing trade data that showed a fall in exports in July.
‘‘Today’s trade data was slightly disappointing, but the main focus was on the better sentiment around Draghi’s plan,’’ he said.
On Thursday (European time), ECB president Mario Draghi announced the central bank would buy unlimited amounts of bonds from the region’s weaker economies, such as Spain and Italy.
Mr Waterer said the news contributed to an increased investor interest in the Australian dollar, after heavy selling earlier in the week.
‘‘With the Aussie looking oversold against the backdrop of some better global news, this prompted some buying up of the currency,’’ Mr Waterer said. ‘‘That helped us overcome some of the trade balance negativity and sent the Aussie dollar beyond the 103 (US cent) level.’’
Official data on Friday showed a widening of Australia’s trade balance deficit in July as exports fell on the back of weaker commodity prices.
The balance on goods and services was a deficit of $556 million in July seasonally adjusted, compared with a deficit of $227 million in June. Exports were down 3.0 per cent, while imports were down 1.0 per cent, the Australian Bureau of Statistics said.
The Australian dollar was also trading at 81.49 Japanese yen, up from 80.18 yen on Thursday, and at 81.62 euro cents, up from 81.03 cents.
Meanwhile, Australian bond futures prices were weaker following the ECB meeting. The September 10-year bond futures contract was trading at 96.890 (implying a yield of 3.110 per cent), down from 96.990 (3.010 per cent) on Thursday.
The September three-year bond futures contract was at 97.450 (2.550 per cent), down from 97.570 (2.430 per cent).
Deutsche Bank bond trader Andrew Bryan said the bond-buying plan had provided optimism, overwhelming domestic concerns about the pace of the mining boom.
‘‘The market has spent much of the week in a fearful mood, with a focus here on weaker Chinese data and the iron ore story,’’ he said. ‘‘But Draghi’s plan has damaged all those thoughts - yields are now higher than were at the start of the week.’’