NEWS / Foreign Exchange

AUD softens ahead of RBA

Another high reached but short lived

The NZD opened around 0.7200 yesterday and traded quietly until buying interest pushed it sharply to the intraday high of 0.7241. This level proved a tough barrier and NZD/USD fell back to support around 0.7210 in the afternoon. Yield has still been a big driver for the local currency and NZD/JPY continued to benefit from the resurgence of carry trades. Opening around 84.85 the cross surged through 85.00 to close around 85.20. Choppy trading conditions were seen in the offshore session and the NZD fell through 0.7200 to post a low of 0.7192 on the back of slightly better than expected US data. It opens around 0.7190 this morning.

AUD softens ahead of RBA

The AUD opened on its highs around 0.8170 yesterday and drifted lower throughout the morning eventually finding support at 0.8140. Profit taking ahead of the RBA decision today appeared to be the main reason as the market still seems divided as to whether the RBA will hike or not. Overnight saw USD strength push AUD/USD to an intraday low of 0.8115 and the currency opens a touch higher around 0.8125 this morning.

Subdued trading session

A relatively quiet day for the majors yesterday. In the local session USD/JPY pushed steadily higher through the key 118.10 level to a one month high on expectations that Japanese investors will resume selling JPY to place money offshore in the new fiscal year. Japanese funds often repatriate overseas profits at March year end, which keeps JPY supported but with the new fiscal year underway, there is growing speculation that this will reverse and investments will resume in the higher yielding currencies. Offshore USD/JPY continued its upward journey, stopping just short of 119.00, helped up by better than expected US home sales data. Elsewhere, the euro traded in a tight range throughout the day but fell towards 1.3350 level on the back of the higher USD/JPY. GBP hit a 2?? month high versus USD, peaking through 1.9800 on strong building data and increased expectations of an interest rate rise as early as this week.

US pending home sales rise 0.7% in Feb. Given that pending sales recovered some of their Jan decline of 4.2% in Feb, despite poor weather, this suggests that upcoming existing home sales data will not be too weak.

US weekly retail sales on the mend. Chain store sales rose 0.3% in the last week of March, their fourth straight gain. The Redbook retail average rose from 0.7% to 0.9%, indicating progressively stronger sales through the month. These results add weight to the view that weak February spending may have been weather-constrained.

Euroland producer price inflation slows to 2.9% yr in Feb. With last year??™s energy price gains not being fully replicated thus far this year, the PPI eased to its lowest in more than two and a half years. Excluding energy, the PPI was up 3.4% yr ??“ little changed from the recent trend.

UK construction PMI rises to 58.9 in Mar. That is a fresh cycle high, suggesting that building activity made an increasing contribution to Q1 GDP growth.