The Australian dollar jumped to a one-month high against the Swiss franc on Friday after Switzerlands central bank stunned financial markets by selling its Swiss currency to fight deflation. The Aussie extended gains made offshore to climb to a high of 0.7792 francs, up from 0.7465 seen here late on Thursday.
The Aussies strength against the Swiss franc helped it to stay above 65 cents against the US dollar. "The Aussie is up on the Swiss bank move, but Im a bit cautious here," said Paul Milton, the chief foreign exchange dealer at Societe Generale.
"The move has nothing to do with fundamentals. I am not willing to get involved up here at these levels," he said. The local dollar was up at $0.6521, from Thursdays $0.6485, but repeatedly failed to clear resistance around $0.6570. The Swiss franc posted a record drop against the euro on Thursday after the central bank intervened in foreign exchange markets to sell it.
The bank also cut interest rates and said it would start buying private Swiss franc debt, in a major step toward quantitative easing. Milton said he would only consider buying the Aussie if it stages a convincing uptrend to climb above $0.6600.
The local dollar has drifted about between $0.6250-$0.6550 in the past month. Some dealers said they were buying the Aussie when it fell near the bottom of the range, and selling it when it was near the top. The Aussie rose on the yen as well to 63.74 yen from Thursdays 62.42. Some analysts have been surprised by the Aussies recent resilience given that most domestic economic indicators point to more pain ahead, while economic reports from abroad were even more awful. Chinas premier Wen Jiabao warned on Friday China may struggle to meet its economic growth target of 8 percent this year.
China is Australias top trading partner, and some investors had pinned their hopes on a pick-up in Chinas economy that would ease the global economic crisis. Aussie bond futures fell on Friday as higher Asian stock markets sapped the flow of safe-haven funds. Three-year bond futures shed 0.08 points to 96.895, and the 10-year contractlost 0.025 points to 95.73.
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