Forex Market: AUD/USD distances from four-month highs following RBA Governor’s comments

The Aussie touched a four-month high against the US dollar as the Reserve Bank of Australia kept interest rates unchanged, but erased earlier gains after RBA Governor Glenn Stevens commented that the currencys recent appreciation will curb the stimulus provided to the economy.

AUD/USD hit a session high at 0.9302 at 03:30 GMT, after which the pair erased daily gains to trade little changed at 0.9258, losing 0.06% for the day. Support was likely to be found at March 31st low, 0.9218, while resistance was to be encountered at November 21st high, 0.9334.

The MSCI Asia Pacific Index of shares rose 0.1%, extending a 1% gain yesterday.

The RBA officials maintained the main interest rate at a record-low 2.5%, where it has been since August last year, in line with analysts estimates. Following the decision the Aussie advanced to the strongest level since November against the US dollar, but pared earlier gains after comments by the central banks Governor Stevens.

“The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months,” RBA Governor Stevens said in a statement following the decision, cited by Bloomberg. “The exchange rate remains high by historical standards.”

Aussies demand was also heightened after government data showed the manufacturing PMI in China, the biggest trading partner of Australia, surged to 50.3 in March from 50.2 in the previous month, defying experts projections for a slowdown to 50.1.

Meanwhile, greenbacks demand was pressured after Federal Reserve Chair Janet Yellen said yesterday at a conference in Chicago that the central bank needed to do more to fight against unemployment, because keeping interest rates near zero for more than five years and swelling its balance sheet with asset purchases seemed not to be enough. She also added that the US economy still needed monetary stimulus for “some time” and that most of the Fed officials shared the same opinion.

“After Janet Yellen’s comments, the dollar came off its highs, particularly against the commodity currencies,” said Callum Henderson, the Singapore-based global head of foreign-exchange research at Standard Chartered Plc., cited by Bloomberg. “In the wake of a fall in cross-asset volatility with China’s PMI data also helping sentiment, you’ve seen renewed focus on carry. The higher yielding currencies in G-10 and emerging markets are doing better.” Australias dollar is one of the G-10 currencies.

Market players deemed Yellens comments as rather dovish, as she signaled the central bank will press on with trimming stimulus, but at the same time, the Fed will not be in a hurry to raise borrowing costs.

Elsewhere, NZD/USD hit a session high at 0.8689 at 07:55 GMT, after which consolidation followed at 0.8678, adding 0.04% for the day. Support was likely to be received at March 31st high, 0.8642, while resistance was to be met at March 28th high, 0.8697, also the pairs highest since August 2011.