Dollar slips after RBA currency remarks


656339_83604184The Australian dollar has fallen below 95 US cents for the first time in three weeks after Reserve Bank of Australia boss said the persistently high currency would eventually get weaker.

At 0700 AEDT on Wednesday, the local unit was trading at 94.78 US cents, down from 95.05 cents on Tuesday.

During overnight trade, it fell as low as 94.72 US cents, its weakest level since October 14.

RBA governor Glenn Stevens on Tuesday said commodity prices will fall, putting sustained downward pressure on the Australian dollar.

OM Financial senior client adviser Stuart Ive said it was interesting that the comments came ahead of a US Federal Reserve announcement, which is expected to push the Australian dollar higher.

The US central bank’s Federal Open Markets Committee (FOMC) is expected to delay tapering of its economic stimulus program until next year because the economy is weaker than previously thought.

“The RBA is making it very clear that it wants the currency lower and the fundamentals don’t stack up,” Mr Ive said.

“I think that’s a very smart move by the governor just ahead of what is widely perceived to be a dovish FOMC announcement on Thursday morning (Australian time).

“We expect the Fed will back off on its tapering for a little bit longer than anticipated.

“If the FOMC does that, it will weaken the US dollar, which means the Aussie dollar will go higher. But it looks like the RBA has stepped in to quell any thoughts of the Aussie going higher, at least against the US dollar in the near future.”

Mr Ive said he expects the Australian dollar to continue to weaken on Wednesday but added that it should stay above 94.00 US cents.


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