AUD/USD lower on US fiscal worries

Australian dollar slid against its US peer on Friday, heading for its first weekly decline in September, as fears of a possible US government shutdown due to a budget deadlock, urged market players to abandon higher-yielding currencies, such as the Aussie.

AUD/USD slid to a session low at 0.9325 at 7:52 GMT, after which consolidation followed at 0.9336, falling 0.33% for the day. Support was to be received at September 17th low, 0.9286, while resistance was to be met at September 19th high, 0.9524.

The House of Representatives of the United States approved legislation to fund the government through December 15th, however, policymakers also voted to defund President Barack Obamas healthcare bill, the Affordable Care Act.

“Tension will increase on the U.S. fiscal front as we approach the deadline of potential government shutdown, and will likely act as a drag on sentiment,” Gary Yau, a research associate at Credit Agricole CIB in Hong Kong, wrote in a note to clients today, cited by Bloomberg. “Overall, the environment remains one of consolidation”.

Meanwhile, demand for the Australian currency was restrained, as Reserve Bank of Australia (RBA) policymakers set to discuss whether a further reduction of the benchmark interest rate was needed at the monthly meeting on October 1st. Traders saw a 12% probability that the RBA will actually cut its benchmark from the already record low level of 2.5%.

At the same time, Australian Treasurer Joe Hockey said that countrys budget has deteriorated since a pre-election statement seven weeks ago, as the new coalition government announced the final deficit for last fiscal year. Australian Treasury said in its outlook released on August 13th, that the deficit figure will increase to 30.1 billion AUD (28.2 billion USD) during the fiscal year, ending on June 30th 2014.

Elsewhere, the Aussie was lower against the euro, as EUR/AUD cross advanced 0.44% to trade at 1.4469 at 8:21 GMT. Earlier on trading Friday it became clear that French economy returned to growth during the second quarter of the year, supported by strong domestic demand and as inventories recovered. The final value of countrys Gross Domestic Product showed an expansion by 0.5% in Q2 compared to Q1, confirming the initial estimate in August. This growth came after two consecutive quarters of economic activity contraction. The annual GDP figure grew 0.4% in Q2, above the initial estimate of a 0.3% growth. French debt, however, continued to rise, reaching 93.4% of the GDP at the end of the second quarter. Debt climbed to 1.912 trillion EUR or almost 80 billion EUR more in comparison with the figure, registered at the end of Q2 2012. During the first three months of this year French debt amounted to 91.8% of countrys economic output.

AUD/NZD pair was losing 0.30% on a daily basis to trade at 1.1266 at 8:35 GMT. Australian dollar has increased its value by 5.3% during September and by 2.5% so far in the third quarter of the year.