AUD/USD reaches fresh two-month lows on speculation RBA will consider an intervention

Australian dollar fell to lows unseen in over two months against its US counterpart on Friday and was set to register the longest sequence of weekly losses in seven years, as speculation appeared that the Reserve Bank of Australia (RBA) may consider an intervention on the currency market in order to ease the strength of the national currency.

AUD/USD touched a daily low at 0.9168 at 4:45 GMT, also the pairs lowest point since September 9th, after which consolidation followed at 0.9193, falling 0.44% for the day. The Aussie slid 2% since November 15th and was poised for a fifth consecutive weekly decline, or the largest such drop since August. No longer period of declines has been witnessed since the six weeks ended in June 2006. Support was likely to be received at September 6th low, 0.9117, while resistance was to be encountered at current session high, 0.9250.

Australian dollar extended its losses against the greenback from yesterday, after Reserve Bank of Australia (RBA) Governor Glenn Stevens said that the central bank will not close the opportunity for an intervention on the currency market, in case it assesses such a move as effective and providing a boost to major economic indicators. These comments hinted that the RBA may probably consider an intervention in order to reduce the value of the Aussie.

“Overall, in this episode so far, the bank has not been convinced that large-scale intervention clearly passed the test of effectiveness versus cost. But that doesnt mean we will always eschew intervention. In fact we remain open-minded on the issue,” Glenn Stevens said.

“There is caution in the market that the RBA may cut rates if the Aussie strengthens,” said Daisaku Ueno, the chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, cited by Bloomberg News. “Both the RBA and RBNZ are trying to talk down the currencies, but the RBA has a bigger impact over the market, so the kiwi is being bought unfortunately as a result of Aussie selling.”

In addition, UBS AG revised down its forecasts for the exchange rate of the Aussie, underscoring RBAs impatience with the currency’s strength and also the view that the Federal Reserve Bank may consider tapering its asset purchases, which has tended to devalue the US dollar. UBS said in a note to clients that it predicts the AUD/USD pair will drop to 0.9000 within a period of three months, as earlier the bank expected that the cross would fall to as low as 0.9300 within the same period.

The yield on Australian 10-year government bonds dipped one basis point, or 0.01 percentage point, to reach 4.32%, reducing its weekly advance to 12 basis points. Yields reached 4.34% on Thursday, which was their highest level since March 2012.

Meanwhile, the greenback received a certain support yesterday, after the Department of Labor said that the number of people who filed for unemployment assistance in the United States decreased by 21 000 to reach 323 000 during the week ending on November 16th 2013, or the lowest number since September. Expectations pointed that the number of claims will fall less, to 335 000. Last week contained a national holiday, as during such days the number of submitted claims is lower than usual. The average number of claims during the past four weeks, an indicator considered as lacking seasonal effects, dropped by 6 750 to 338 500.

At the same time, the number of claims, submitted in a period of over one week, which refers to people who have already been receiving jobless benefits, climbed by 66 000 to reach 2.88 million during the week ending on November 9th.

Another positive impulse for the US currency came after Markit Economics reported on Thursday, that the index, gauging manufacturing activity in the United States, rose to a reading of 54.3 in November, according to preliminary data, which marked an eight-month high. The final value of the manufacturing PMI came in at 51.8 in late October. Values above the key level of 50.0 are usually considered as an indication that activity in the sector has expanded, as Novembers result implied a faster pace of expansion. The sub-index of new orders also registered a higher rate of increase in November, while the gauge of employment demonstrated a slide.

Elsewhere, after having plunged to the lowest point since October 2008 at 1.1171 earlier, AUD/NZD cross was trading at 1.1195 at 8:41 GMT, losing 0.56% on a daily basis. EUR/AUD pair was advancing 0.64% today to trade at 1.4698 at 8:43 GMT.