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Forex - AUD/USD gains after slew of data, Yen stronger despite Q3 capex

Published 12/01/2013, 07:35 PM
Updated 12/01/2013, 08:50 PM
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Investing.com - The Australian dollar gained after a slew of data that left the general consensus intact of steady monetary policy by the Reserve Bank of Australia this week and the Japanese yen gained strength despite weaker than forecast third quarter capex data.

AUD/USD traded at 0.9134, up 0.26%, after a busy round of data releases that overall showed the scope for a rate cut from a record low 2.5%  at Tuesday's Reserve Bank of Australia review was unlikely.

The performance of manufacturing index, or Australian PMI, slipped back into the contraction zone and back to levels seen before the September federal elections to 47.7. down 5.4 points, according to AI Group.

"While the current downward pressures on the (Australian) dollar are positive for the industry, the currency remains stubbornly high. The dollar and fierce import competition continue to take their toll, as many businesses struggle to maintain market share in an environment of generally weak demand for local goods and equipment. Export markets also remain tough under the influence of the relatively high dollar with the exports sub-index dropping under 30 points again this month," said AI Group's chief executive Innes Willox.

TD-MI data showed month-on-month inflation in Australia accelerated 0.2% in November, taking annual inflation closer to the mid-point of the Reserve Bank of Australia's 2% to 3% target band.

TD Securities head of Asia-Pacific Research Annette Beacher said while inflation is expected to remain within the bottom half of the RBA band until mid-2014.

"We expect all forthcoming RBA communiques and speeches to continue talking  down the AUD rather than hint at rate cuts. We are of the view that rising house price inflation and the recent spark in credit growth prevents entertaining another cash rate cut."

In official data, the Australian Bureau of Statistics said the number of dwelling units approved in Australia fell less than  expected in October at -1.8%, compared to a forecast of -5.0%, signaling tentatively that housing construction has the potential to pick up the slack in the economy as resources investment wanes.

ABS also said that business inventories in Australia fell more than expected in the third quarter to -0.5%, compared to a forecast of -0.1%, following an upward revision in second quarter led by wholesale trade and manufacturing, which offset gains in retail and mining.

USD/JPY traded at 102.28, down 0.18%, giving up early weakness even as data on company capital spending plans came in weaker than expected.

Planned capital spending by non-financial Japanese companies rose 1.5% in the third quarter, compared to a forecast of 3.1%, according to a ministry of finance survey, highlighting uncertainty over how soon overseas demand, particularly emerging markets, will pick up and how quickly domestic demand will rebound after a sales tax hike in April.

EUR/USD traded at 1.3602, up 0.08%, on Monday. Data showed that annual rate of inflation in the euro zone rose more-than-expected in November, easing concerns over further rate cuts by the European Central Bank.

Eurostat said the annual rate of consumer inflation rose by 0.9% in November, recovering from a four year low of 0.7% in October. Economists had forecast an annual increase of 0.8%.

The euro ended the week 1.46% higher against the broadly weaker yen, with EUR/JPY settling at 139.21, the highest level since June 2009.

In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report for November, amid expectations that the Federal Reserve will start to scale back its stimulus program at one of its next few meetings.

Meanwhile, rate decisions by the ECB, the BoE, the Reserve Bank of Australia and the Bank of Canada will also be in focus.

On Monday, China is to release the final reading of its closely watched HSBC manufacturing PMI and the euro zone reports revised data on its manufacturing PMI, while Spain and Italy are also to release individual reports.

Switzerland is to publish the results of its SVME manufacturing PMI, and the U.K. is to release its manufacturing PMI.

Federal Reserve Chairman Ben Bernanke is to speak at an event in Washington. Later Monday, the Institute of Supply Management is to release its manufacturing PMI.

The U..S. dollar index, a weighted basket of currencies, traded at 80.57, down 0.14%.

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