Australian dollar weakens in late trade

The Australian dollar has lost some ground as more Ukraine crisis developments weigh on market confidence.

The Australian dollar has lost some ground as more Ukraine crisis developments weigh on market confidence.

At 4.51pm (AEDT), the local unit was trading at 90.26 US cents, down from 90.90 cents on Friday.

Over the weekend, Russian state-owned company Gazprom increased the pressure on Ukraine's new government by threatening to cut off gas supplies.

But FXCM currency strategist Ilya Spivak says he doesn't expect problems in Ukraine to have too much of an effect on markets.

"Vested economic and geopolitical interests in Ukraine, from both Russia and the West, should be enough to have cooler heads prevail," he said.

"It is arguably for that reason that Eastern European troubles have not sparked broader emerging market contagion and financial market distress."

Mr Spivak said the Australian dollar should be well supported this week after last week's raft of positive economic data.

He said that data increased the likelihood of a period of interest rate stability and decreased the chances of another cash rate cut by the Reserve Bank of Australia.

"The fourth-quarter GDP (gross domestic product) report topped economists forecasts, showing the year-on-year growth rate accelerated to 2.8 per cent and marked the highest reading since the three months through December 2012," Mr Spivak said.

"Meanwhile, retail sales unexpectedly jumped 1.2 per cent in January to yield the largest increase in 11 months.

"While an outright interest rate hike is still not being telegraphed over the coming 12 months, a meaningful hawkish shift in the underlying bias for what the RBA's next move will be is clearly perceptible."

Mr Spivak said the release on Thursday of local employment figures for February will give the market more of an insight into what and when the RBA's next move will be.

Meanwhile, the Australian bond market was weaker.

At 12pm (AEDT), the March 2014 10-year bond futures contract was trading at 95.835 (implying a yield of 4.165 per cent), down from 95.890 (4.110 per cent) on Friday.

The March 2014 three-year bond futures contract was at 96.960 (3.040 per cent), down from 97.000 (3.000 per cent).

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles