AUD/USD slightly higher as Obama will nominate Yellen to lead Fed

Australian dollar gained ground against its US counterpart on Wednesday, as a White House official said that President Barack Obama will nominate Federal Reserve Vice Chairman Janet Yellen today to lead the central bank, while this news spurred demand for high-yielding currencies, such as the Aussie.

AUD/USD distanced from a session low at 0.9412, recorded at 1:40 GMT, to reach 0.9444 at 6:22 GMT, gaining 0.19% for the day. Support was likely to be received at October 3rd low, 0.9367, while resistance was to be encountered at September 19th high, 0.9524.

Federal Reserve Bank Vice Chairman Janet Yellen would probably succeed current Chairman Ben Bernanke, whose term ends on January 31st. She was also the favorite candidate, as shown in surveys of economists and had the support of 20 members of the Senate Democratic caucus, who signed a July 26th letter to President Barack Obama, Bloomberg reported. This announcement will come today during an event at the White House, the official stated in an e-mail. “The Yellen news did put a bit more positive risk sentiment in the market and you saw the yen weaken on the crosses,” said Peter Dragicevich, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), cited by the same media. “The view is that Yellen is obviously quite dovish and markets could take that as a sign that policy will remain accommodative for a more extended period of time.”

At the same time, US House Speaker John Boehner insisted on Tuesday to negotiate immediately with Barack Obama, rejecting the President’s intention to debate only after the partial shutdown ends and the risk of default is pushed back.

It also became clear that US Senate Democrats are planning to conduct a test vote before the end of this week on a measure that would grant President Barack Obama authority to increase the 16.7 trillion USD debt ceiling, probably for one year, unless two-thirds of both chambers of Congress disapprove. Nations borrowing authority is expected to lapse on October 17th.

Meanwhile, in Australia, Westpac said that their index, gauging consumer confidence in the country, decreased 2.1% in October, neutralizing to a certain extent Septembers 4.7% gain. Westpac experts stated that Octobers drop in confidence was due to the waning positive reaction, following Septembers elections, as it influenced results during the same month. Other negative factors, however, were present, including the steady drop of equities, speculations over a possible US default and the stronger Australian dollar.

Elsewhere, the Aussie was higher against the euro, with EUR/AUD cross decreasing 0.33% on a daily basis to trade at 1.4360 at 6:58 GMT. Additionally, AUD/NZD pair was advancing 0.23% to trade at 1.1399 at 6:59 GMT.