The Australian Dollar to US Dollar (AUD/USD) exchange rate is trending within a tight range on Wednesday afternoon.
After the Bank of Japan (BoJ) refrained from expanding stimulus, Asian stocks rallied. This supported demand for high-yielding assets, allowing the Australian Dollar to advance versus the majority of its most traded currency competitors. Positive domestic data also aided the ‘Aussie’ (AUD) uptrend.
The US Dollar, meanwhile, was generally trending lower versus its major peers after mixed economic data promoted speculation the Federal Reserve will delay policy normalisation. However, after the Bank of Canada (BoC) cut its benchmark rate, the US Dollar strengthened.
The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trending in the region of 0.8161.
Given that most experts anticipated BoJ Governor Kuroda to announce expansion of the current stimulus programme, the central bank’s inaction caused the Yen and Asian stocks to rally. In conjunction with rising oil prices, this caused improved market sentiment and demand for high-yielding assets.
‘They revised down the CPI forecast, so the actions and the language seem rather inconsistent,’ said strategist Jeremy Stretch. ‘Some people were a little disappointed that there was no change. For me, the dip in dollar-yen provides a better level to go back in again.’
Australian data printed positively late on Tuesday evening, giving the ‘Aussie’ additional support. The Consumer Confidence Index increased from 91.1 to 93.2 in January thanks to low crude prices.
The Australian Dollar to US Dollar (AUD/USD) exchange rate dropped to a low today of 0.8152.
After US economic data produced mixed results on Wednesday, the US Dollar softened versus many of its peers amid speculation the Federal Reserve will delay a rate revision. Mortgage Applications declined from 49.1% to 14.2% in January. Building Permits failed to increase as much as the median market forecast of a rise from -3.7% to 0.8%, with the actual data only reaching -1.9%. Housing Starts, however, advanced from -4.5% to 4.4%.
However, the move by the Bank of Canada to lower its cash rate saw heightened demand for its southern cousin. This is due to the prospect of cheaper trade.
Once the dust settles from the BoC’s rate cut, the Australian Dollar to US Dollar (AUD/USD) exchange rate is likely to trend higher for the remainder of Wednesday.
The Australian Dollar to US Dollar (AUD/USD) exchange rate climbed to a high today of 0.8234.
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