Australian Dollar Outlook - 16 November 2012
Bell FX Currency Outlook: The Australian Dollar is lower after reports of large currency sales by the Reserve Bank of Australia and weak global market performances.
Australia: It was reported yesterday the RBA was a net buyer of foreign exchange reserves in October which continues the recent tactic of "passive" and modest intervention in the AUD.
It would appear the Bank is meeting some foreign demand for the AUD by taking AUD deposits onto their balance sheet, receiving the FX, and not clearing it in the market.
These sales of the AUD by the RBA as well as weak global markets are impacting the AUD. Stock markets have declined globally, as have commodity markets with escalating Middle East tensions.
When this is combined with weak European GDP data and nervousness over the US 'fiscal cliff', the tension is palpable.
Thankfully, data releases are quiet today and tonight with US releasing October industrial production data, with long term portfolio capital flows data for the US also scheduled for September. With this in mind, we may see some respite today and the
overnight session and thus see the AUD steady.
Majors: Last night's news had a bearish tone and this weighed on the EUR. The JPY is also weaker as political risk stemming from the upcoming Japanese election on 16 December is taken into account.
The JPY was weighed down by comments from Japan's opposition leader Abe when he stated he believes the Bank of Japan should add further support to create growth and inflation.
This may include lowering the benchmark policy rate to zero or below and extending the central bank's asset purchase program. Fed Chairman Bernanke gave a speech on US housing overnight. He noted some pick up in housing activity but that lending standards remain tight.
Yesterday, a new Standing Committee of the Political Bureau of the 18th Communist Party of China (CPC) Central Committee was unveiled, marking the completion of the leadership change.
Our Chinese economists expect China's economic policy to continue to be guided by the current 12th five-year plan, with its economic structure unlikely to experience a significant change.
Oil prices were weaker overnight, spot gold prices weakened alongside equities whilst base metals prices were mixed. Have a great weekend.
Economic Calendar
16 NOV EU Sep current account
EU Sep Trade Balance
US Sep TIC data $bn
US Oct Industrial production
US Fedspeak - Lockhart
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