Date
21 July 2017
The weak Aussie has provided support to several key service sectors including tourism, education and corporate services. Photo: Australia.com
The weak Aussie has provided support to several key service sectors including tourism, education and corporate services. Photo: Australia.com

Strong Australian economy to help stabilize currency

Australia expects to sustain its robust economic growth, lower the unemployment rate and push up wages and inflation, Reserve Bank assistant governor (economic) Christopher Kent said in an upbeat speech on Tuesday.

“If commodity prices were to stabilize at around current levels, that would be a marked change from recent years. Also, the end of the fall in mining investment is coming into view,” Kent said.

The Aussie dollar has weakened since 2013, providing critical support to the service industry, including tourism, education and corporate services, he said.

Having managed to stay above the 100-day moving average of 0.748 last week, technically, the currency is likely to stabilize, with a chance to test the resistance zone, ranging from 0.776 to 0.80.

Elsewhere, Federal Reserve governor Lael Brainard warned against moving too quickly on rate hikes in a speech in Chicago on Monday.

She called for “prudence in the removal of policy accommodation”, citing uncertainty in the labor market and downside risk in emerging market economies.

That’s probably the last official remarks before the Federal Open Market Committee meeting next week, and therefore could be seen as an important indication of the central bank’s policy direction.

September Fed funds futures currently imply a rate hike possibility of only 15 percent.

Meanwhile, the Japanese yen has been rising steadily against the US dollar since the start of the year.

The Bank of Japan will hold a two-day meeting next week, but an aggressive move on the interest rate front is not expected.

The sterling weakened following the release of a lower-than-expected consumer price index for August.

The 25-day moving average of 1.316 is a crucial support level, while 1.348 and 1.358 are resistance levels to watch.

This article appeared in the Hong Kong Economic Journal on Sept. 14.

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

CG

Sales director, Emperor Capital Group Limited; HKEJ columnist

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