Dollar steadies after a bumpy ride
Late in the session the dollar was trading at US90.03¢, up from US89.98¢.
It fell as low as US89.32¢ early on Thursday after the minutes of a US Federal Reserve meeting showed that some policy makers might want to start winding down the Fed's economic stimulus program this year.
It then rallied as high as US90.44¢ after a report showed that Chinese manufacturing activity increased for the first time in four months.
Easy Forex currency dealer Tony Darvall said the dollar had stabilised above US90¢.
"It's not a major move, it's been pretty quiet," he said. "The US dollar strength is not really playing out against the euro or the pound."
Mr Darvall said there would not be a large amount of strength in the US dollar until the Fed actually starts slowing down its asset purchases.
Meanwhile, bond futures prices ended a two-day losing streak, that was sparked by expectation of a tapering of economic stimulus in the US. Expectation that the US Federal Reserve will wind down its $US85 billion-a-month($94 billion) bond purchase program has caused US and Australian bonds to weaken for most of the past two weeks.
Commonwealth Bank interest rate strategist Philip Brown was not surprised by the correction in the Australian market on Friday. "We had a fair bit of a sell off in the last few days, so it's probably enough to calm down a little bit," he said.
The September 10-year bond futures contract was trading at 95.945 (implying a yield of 4.055 per cent), up from 95.915 (4.085 per cent) on Thursday, while the three-year contract was at 97.150 (2.850 per cent), up from 97.130 (2.870 per cent).
During the offshore session on Friday night, markets will be focusing on the release of US new home sales data for July.
Mr Brown said he expects bond markets to be fairly quiet before the release of official Australian business investment figures and expenditure expectations, due out on Thursday.
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The Australian dollar steadied after a bumpy session. Late in the day it was trading around US90.03¢, up from US89.98¢. Earlier it fell as low as US89.32¢ after US Fed minutes, then rallied to as high as US90.44¢ following stronger Chinese manufacturing data.
The initial fall followed minutes from a US Federal Reserve meeting that showed some policymakers may want to start winding down stimulus, which pressured the AUD. The subsequent rally came after a report that Chinese manufacturing activity rose for the first time in four months, supporting risk-sensitive currencies like the Australian dollar.
Easy Forex currency dealer Tony Darvall said the dollar had stabilized above US90¢ and described the move as quiet rather than a major shift. He noted the US dollar's strength hadn’t significantly played out versus the euro or pound and that a big USD move is unlikely until the Fed actually slows asset purchases.
Bond futures recovered after a two-day losing streak that was sparked by expectations the Fed will taper economic stimulus. The expectation the Fed will wind down its roughly US$85 billion-a-month bond purchases has weakened US and Australian bonds over the prior two weeks. The article cites the September 10‑year futures at 95.945 (implying a 4.055% yield) and the three‑year contract at 97.150 (implying a 2.850% yield).
Commonwealth Bank interest rate strategist Philip Brown said he wasn't surprised by the correction, noting there had already been a fair bit of sell‑off in recent days and the market was likely calming down a little as a result.
Markets were expected to focus on US new home sales data for July during the offshore session, and then on official Australian business investment figures and expenditure expectations, which were due the following Thursday—both of which could influence short‑term AUD and bond market moves.
Article commentary links expectations of Fed tapering to weaker US and Australian bonds and potential US dollar strength. However, traders in the piece noted that a materially stronger US dollar is less likely until the Fed actually begins slowing its asset purchases, rather than just talking about it.
The piece suggests short‑term volatility is driven by major cross‑market developments—Fed policy signals and key economic data (like Chinese manufacturing or US housing). With several data releases due, investors should be prepared for periods of quiet trading punctuated by moves around those reports, though recent comments described the session as relatively quiet overall.
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