Commodities lift dollar
CMC Markets foreign exchange dealer Tim Waterer said the currency was benefiting from a rise in commodity prices. We're seeing a pretty good bounce-back by gold this week, and crude oil is up a bit as well and equities have been going along quite well," he said.
"That is sapping some US dollar demand and leaving the door open for the Australian dollar to push above 103¢."
Mr Waterer said the currency had been prevented from rallying further due to growing expectations the Reserve Bank would cut the cash rate in the next few months.
"That is curtailing some buying in the dollar," he said.
Meanwhile, bond futures prices were unchanged after traders sat on the sidelines after the Anzac public holiday. Commonwealth Bank head of debt research Adam Donaldson said it had been one of the quietest trading days of the year. He said the market would spend the next week sizing up the possibility of an interest rate cut in May.
Speculation the Reserve Bank will cut the cash rate, currently at 3 per cent, at its May 7 meeting has increased after official figures this week showed inflation in the middle of the central bank's 2 to 3 per cent target range.
"The market is quite uncertain as to whether the RBA will be firing the trigger at its May meeting," Mr Donaldson said.
The June 10-year bond futures contract was unchanged at 96.850 (implying a yield of 3.150 per cent). The three-year contract was steady at 97.410.
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A rise in commodity prices helped lift the Australian dollar. Late on Friday the local unit was trading at US103.10¢, up from US102.46¢, as gains in commodities and equities reduced demand for the US dollar, according to CMC Markets foreign exchange dealer Tim Waterer.
Gold and crude oil were cited as drivers. Tim Waterer said there was a 'pretty good bounce-back by gold' this week and that crude oil was up a bit, which supported the currency's move higher.
Growing expectations that the Reserve Bank will cut the cash rate in the coming months are curtailing some buying of the dollar. Tim Waterer said those expectations have prevented a larger rally.
The cash rate is currently 3 per cent. The article explains that speculation about a forthcoming cut to that rate is weighing on demand for the Australian dollar and influencing investor behaviour.
Bond futures were largely unchanged after the Anzac public holiday, with traders sitting on the sidelines. Commonwealth Bank head of debt research Adam Donaldson said it was one of the quietest trading days of the year and that markets will spend the next week sizing up the possibility of an interest rate cut in May.
The June 10‑year bond futures contract was unchanged at 96.850, which the article says implies a yield of 3.150 per cent. The three‑year contract was steady at 97.410.
Official figures showed inflation sitting in the middle of the Reserve Bank's 2 to 3 per cent target range. That result has increased market speculation that the RBA might cut the cash rate at its May 7 meeting.
Investors should watch commodity price moves (especially gold and oil), upcoming inflation data and the market reaction to whether the Reserve Bank proceeds with a rate cut at its May 7 meeting, as these factors were highlighted as influencing the currency and bond markets.
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