AUD/USD stable amid continuing US fiscal debate

Australian dollar traded steadily against its US peer on Wednesday, preserving five-day gains and also nearing four-month highs, as market sentiment was dominated by the ongoing fiscal talks in the United States, while the deadline for action was already in sight.

AUD/USD touched a session high at 0.9544 at 0:00 GMT, after which consolidation followed at 0.9535, rising 0.09% for the day. Support was likely to be received at October 14th low, 0.9435, while resistance was to be met at June 19th high, 0.9557.

Fitch Ratings, the only ratings agency, that still has an AAA rating on the United States, put US Treasury bonds on “Rating Watch Negative” on Tuesday. This could be considered as a signal that Fitch was intending to reduce its rating on US sovereign debt. “The prolonged negotiations over raising the debt ceiling … risks undermining confidence in the role of the U.S. dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the U.S.”, the ratings agency said in a statement.

Meanwhile, demand for high-yielding currencies, such as the Aussie, increased, as the Senate leaders in the United States were in a haste to reach an agreement in order to end the fiscal crisis, while the latter gained intensity after Republicans’ last minute deal failed on Tuesday. The emerging Senate accord might be announced as early as today, though its passage in the Republican-led House of Representatives was still far from assured.

A “clean” Senate bill to fund the US government and raise the debt ceiling would pass the House and, at the same time, if offered by the Senate, it will be presented for a vote by House Speaker Boehner, according to Pennsylvania Republican Representative Charles Dent in an interview on CNN.

In Australia, the Melbourne Institute Leading Index, which is used as a basis for forecasting nations economic growth in short term and intermediate term, dipped 0.1% in August, after it increased 0.4% in July, a revision down from a 0.6% gain previously.

This data came out one day after the minutes of Reserve Bank of Australias most recent meeting on policy said that policymakers agreed the bank should again neither close off the possibility to cut the benchmark rate further, nor signal an imminent intention to reduce it. In addition, the minutes stated that despite the recently registered gains, the Australian dollar still remained about 10% below its highest point, recorded in April.

In addition, the yield on Australian three-year bonds climbed two basis points to reach 3.178%, after having touched 3.179% previously, or the highest yield since April 2012.

Elsewhere, the Australian dollar was steady against the euro, with EUR/AUD cross marking a 0.01% uptick to trade at 1.4202 at 8:19 GMT. AUD/NZD pair was losing 0.49% on a daily basis to trade at 1.1320 at 8:20 GMT.