The Australian dollar struck decade highs against the euro on Thursday, but was otherwise hamstrung by a bounce in the US dollar and news that the International Monetary Fund was selling more gold. The euro hit a low of A$1.5112, but had edged off by late afternoon to languish at A$1.5149. A J.P. Morgan trader said pension and mutual funds were dominant sellers of the euro against the Aussie right now.
He said no stop losses were seen between present levels and the huge support level of A$1.50, but expects selling to accelerate if the level breaks. "If A$1.50 doesn't hold, it could fall all the way through to A$1.45," he said. On the chart, the euro has held to a downward trend channel against the Aussie since April last year, and is now languishing near the floor of the channel at around A$1.5090.
But otherwise, so sluggish was the local dollar that it failed to rise on remarks by a top central banker at the Reserve Bank of Australia (RBA) who hinted at more policy tightening at home on the back of strong economic growth. RBA Assistant Governor Philip Lowe said Australia could grow by 3.25-3.50 percent this year and next, up from an estimated 2.0 percent in 2009, helped by strong growth in Asia which buys 70 percent of Australian exports.
Despite that, the Aussie shied from three-week highs and was weaker at $0.8962, from $0.9014 seen here late Wednesday. It was hurt in part by a bounce in the US dollar that was driven by hopes the US Federal Reserve may tighten policy sooner rather than later.
News the IMF would sell 191.3 tonnes of gold to raise money hit gold prices and weighed on the Aussie as well. Australia is the world's No 2 gold exporter. Some traders also said they were reluctant to alter trade positions ahead of RBA Governor Glenn Stevens' appearance on Friday before a parliamentary committee on economics.
Stevens, who will brief the politicians on the Australian economy, usually speaks more candidly at these sessions about monetary policy. He makes an opening statement at 2230 GMT before taking over two hours of questions. Bill and bond futures were little changed as traders stuck to bets of a 40 percent chance that local interest rates will rise 25 basis points to 4.0 percent in March.