AUD/USD Sells Off Following Downbeat Aussie Retail Sales & Building Approvals for Feb

Australian retail sales disappointed the consensus forecast in February. Sales fell by 1.4% on the month versus expectations for a 0.3% rise to bolster the revised 1.1% gain in January. Released simultaneously, Australian private sector credit for February was essentially in-line with economists’ forecasts. Credit rose 0.4% on the month, as expected, and mirroring its gain in January. In annualized terms, credit increased by 1.6% in February versus calls for a 1.5% rise and following the 1.3% gain the month before. Although lower-tier in nature, Aussie building approvals data compounded the disappointing retail sales figures: approvals slipped by 3.3% on the month in February in a move that underarched calls for a 2.1% gain to partially erase the revised 5.5% drop the month before. Following the downbeat retail sales and housing figures, the Australian dollar sold off by almost 0.6 U.S. cents to hit a new session low of $0.9146USD.

Negligible JPY Reaction to Downbeat BSI Survey of Japanese Manufacturers

Japan’s large manufacturers remained optimistic in Q1 though sentiment declined from the previous quarter, according to government data released on Thursday. The BSI survey of large manufacturers fell to a 4.3 level in the first three months of 2010 from 13.2 in the previous quarter. A reading above zero indicates that optimists outweigh pessimists. However, the all industry poll indicated increasing pessimism with the index falling to a -2.4 level from -1.9 in Q4 of 2009. Despite the downbeat data, the yen’s reaction was minimal – USD/JPY rose by only a handful of pips to 90.45.

No USD/JPY Reaction to Above-Consensus Rise in Japanese Tertiary Sector Index

Japan’s service sector continued to expand in January, according to the island nation’s tertiary industry index on Wednesday. The indicator rose by 2.9% on the month, surprising expectations for only a 1.3% gain to follow the index’s 0.9% fall in December. Despite the upbeat results, the release remains only a medium-tier data-point and so was essentially shrugged off by the yen. The extent of USD/JPY’s reaction was to slip by a handful of pips to 90.29 yen. In early Asia-Pacific trading on Wednesday, the pair has traded between a high of 90.45 and al low of 90.22. Short term resistance lies at 92.15 with support at 89.63 and 88.14.

AUD/USD Slips as RBA Minutes Reveal Rates to “Move Gradually” Towards Normal Levels

Released on Tuesday (Monday night EDT), the Reserve Bank of Australia’s minutes from their meeting of March 2 revealed that Board members considered it “appropriate for interest rates to move gradually towards normal levels, and that it was time to make take another step in that direction”. The minutes also said, "Some recent indicators suggested that growth might already have been running at or close to trend for a few months." The central bank also said that inflation is likely to fall to around 2.5% in the year ahead. The RBA also said that growth will be "around trend rates over the next couple of years" and global economic activity will “continue at a reasonable pace with significant regional differences". With traders no doubt focusing on the fact that rates will move “gradually”, AUD/USD weakened to $0.9125USD following the announcement.

AUD Takes Back Losses From Weak Employment Report

The Australian dollar is taking back losses incurred after a weaker than expected employment report for February.

According to the Australian Bureau of Statistics on Thursday, the economy created 0.4k jobs in February, short of the prior month’s revised 56.5k gain and expectations for a more modest 15.0k increase.

Prior to revisions, January job creation was up 52.7K.

Meanwhile, the unemployment rate rose to 5.3% from the revised 5.2% the month prior, in line with forecasts.

Prior to revisions, the unemployment rate was 5.3%.

Details of the report were good, however with 11.4k full time jobs created, adding to the prior month’s 12.0k gain. Part time employment, meanwhile, declined by 11.0K compared to the prior 44.5k pickup.

The news put pressure on the Australian dollar, with the currency losing 15 pips to the USD at 0.9121.

Nevertheless, the pair last traded flat against the USD, at 0.9140, after trading in a range between 0.9121 and 0.9157 so far today.

Short term resistance lies at 0.9243, and 0.9328, with support at 0.8979, 0.888 and then 0.8801.

Aussie Hanging On to Gains After Upbeat Comments From RBA’s Lowe

The Australian dollar is trying to hang on to some gains following some upbeat commentary from Reserve Bank of Australia Assistant Governor Philip Lowe on Wednesday.

Speaking at an event in Sydney today, the central banker said that the RBA needs to continue stimulating the supply side of the economy so as to allow domestic demand to progress without causing inflation, and that he expects the Australian economy to expand at above-average pace over the next few years, a development which would likely spur inflation and house prices.

He added that efforts by Chinese officials to tighten monetary policy are a positive development for the global economy, and that the strength of the economic rebound in Asia is surprising.

The comments suggest that more monetary policy tightening could be in the cards, as the central bank would seek to combat higher prices by raising interest rates. Indeed the central bank has hiked multiple times in recent months, with additional tightening already signaled to the markets.

On the data side, Westpac reported that its benchmark Australian consumer confidence index for the month of March advanced by 0.3 points to 117.3, a 0.2% month-over-month increase. In February, the index deteriorated by 2.6%.

The good news was later turned aside, however after home loans fell 7.9% month-over-month in January despite calls for a 2.0% increase.

December’s home loans, meanwhile, declined by 5.1%. Investment lending rose 0.9% compared to the prior 1.6% gain and the value of loans contracted by 5.0% month-over-month, adding to the prior 4.2% contraction.

In the aftermath of the announcements the Australian dollar finds itself higher by 10 pips at 0.9150 after trading in a range between 0.9163 to 0.9133. Short term resistance lies at 0.9243, and 0.9328, with support at 0.8979, 0.888 and then 0.8801.

PBOC Officials Hint At Looser Currency Controls Down the Road

Chinese officials appear inclined to move towards looser controls on the Chinese yuan but the time is not yet right, according to officials at the People’s Bank of China over the weekend.

Speaking at the National People’s Congress, central bank Governor Zhou Xiaochuan, said China must be very careful in how its abandons its crisis-fighting policies, including its management of the exchange rate between the yuan and the U.S. dollar.

The global economic recovery is not yet solid, he added.

Adding to the comments, PBOC deputy Su Ning, said that a gradual appreciation of the yuan will be beneficial to China, in that it would spur domestic demand, and improve standards of living for the nation.

The both policymakers’ comments suggest that China is indeed planning to loosen controls on the currency down the road, although the timing appears academic at best.

Indeed, while a stronger domestic economy would likely help China, it likely remains too soon for the nation to risk jeopardizing its thriving export economy with a stronger currency.

Meanwhile on the monetary policy front, the People’s Bank of China will said it would maintain a “moderately loose” monetary policy and sufficient liquidity to its financial system, reiterating comments made over the last several weeks over which the PBOC has tightened policy slightly.

Likely an appreciation in the yuan will have an upward effect on the U.S. dollar against which it is tied, but that time remains a ways off.

Aussie Dollar Rallies as Australian Retail Sales are Better the Consensus in Jan.

Australian retail sales rose at a faster-than-expected pace in January. Seasonally-adjusted, they increased by 1.2% on the month in a move that exceeded the consensus forecast for a 0.5% gain to follow the revised 0.9% fall in December. The upbeat data provoked a rally in the Aussie dollar, which immediately strengthened by 29 pips to reach $0.9014, though it failed to breach its session high two pips above that before it rapidly fell back. Nonetheless, in less than a minute, AUD/USD rose again and recently traded at $0.9003. If the pair does manage to breach its intraday high of $0.9016USD, it’s targeting resistance of $0.9071USD from Feb. 23 and then $0.9328USD from Jan. 14.

AUD/USD Rises to New Intraday High as RBA’s Stevens Says Aussie Financials have Weathered the Financial Storm Well

Speaking on a panel discussion in Melbourne on Monday (Sunday evening EST), Reserve Bank of Australia Governor Glenn Stevens said that although the nation’s banks have weathered the global crisis well, it would be “foolish” to argue that everything is Australia is “peachy”. He added that it “wouldn’t hurt” Aussie financials to have more capital. While making no dramatic moves, AUD/USD has steadily strengthened during Stevens’ speech, rising by 17 pips to carve out a new session high of $0.8991USD. The pair’s targeting resistance of $0.9071USD, touched on Feb. 23.