The Australian dollar nudged higher on Friday, recovering from a two-week low in offshore trade after the US dollar fell on comments from China's central bank chief that China was looking to diversify its reserves.
Investors have been trimming record "long" positions in the Aussie - effectively a bet the currency would rise - after soft economic data this week and what markets interpreted as a less hawkish tone from the Reserve Bank of Australia (RBA).
"I don't really expect the support level of $0.7645 to break and I don't expect the Aussie dollar will rally either above $0.7720, which is probably resistance," said Besa Deda, currency strategist at Commonwealth Bank of Australia.
She said the Aussie was consolidating recent moves. The Aussie dollar was quoted at $0.7677/79 compared with $0.7665/70 here late on Thursday, according to Reuters data. It ranged from $0.7673 to $0.7698. It struck a two-week low of $0.7645 offshore.
Analysts noted the US dollar was broadly weaker after comments from China's central bank governor, Zhou Xiaochuan, that China had a clear plan to diversify its $1 trillion foreign exchange reserves and was considering various options to do so.
"I think this is the beginnings of a trend where there will be less savings available from Asia to fund the large trade and current account deficits in the United States," said Stephen Roberts, the head of research at Grange Securities.
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