Despite the release of more negative than forecast Australian data, the ‘Aussie’ was able to recoup recent losses over the course of local trade.
The Australian Dollar exchange rate was trading in the region of 1.0271 against the US Dollar as of 09:42 am GMT
Figures compiled by the Australian statistics bureau revealed a larger than initially recorded trade deficit figure for December (688 million Australian Dollars) and a widened deficit of 1.06 billion Australian Dollars in January.
Economists forecast a deficit of 500 million Australian Dollars for January.
Although the ‘Aussie’ posted initial declines after the report was first published, it was able to rebound as investors held bets that the Reserve Bank of Australia will refrain from cutting rates next month.
Speculation that the RBA will keep rates at their current level for the foreseeable future allowed the ‘Aussie’ to post a modest advance of 0.2 per cent against the US Dollar. It was little changed against other safe-haven rival the Japanese Yen.
As currency strategist Gareth Berry commented: ‘The RBA has taken the view that the easing they’ve done so far has yet to work its way into the economy. If they do cut at all this year, it’s not going to be immediate. Some bearishness on the Aussie is justified, but overbearishness is not.’
Similarly, another industry expert stated: ‘We think the broad economic picture in Australia, although not necessarily super strong, is still not enough for the RBA to ease any further this year’.
When the Australian central bank met earlier this week it held its benchmark interest rate, intimating that the easing in fiscal policy seen last year is making a positive impression on the economy.
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