Forex Market: AUD/USD hovers close to 4-month highs on signs of further strength in Australian economy

The Aussie held close to the strongest level in more than four months against its US counterpart on Thursday, after Reserve Bank of Australia Governor Glenn Stevens said yesterday there were early signs of a transition from a mining-driven demand to domestic consumption and that the economy may strengthen later this year.

AUD/USD hit a session high at 0.9244 at 08:40 GMT, after which consolidation followed at 0.9236, adding 0.1% for the day. Support was likely to be received at March 26th low, 0.9154, while resistance was to be encountered at March 26th high, 0.9245, also the pairs highest since November 22nd.

The MSCI Asia Pacific Index of stocks added 0.3%, after falling as much as 0.7%.

Yesterday, Steven’s did not comment on the exchange rate, but said that the Australian dollar direction depends on market players’ view of the nation’s fundamentals, and that the economy already showed signs of re-balancing from mining-led demand to broader domestic demand, at a speech in Hong Kong today. He also added that borrowing costs, currently at a record-low 2.5% are likely to remain steady for a period, helping the economy to re-balance.

In his previous comments, Stevens was referring to Aussie’s as too strong given economic fundamentals, trying to talk down the exchange rate.

“He did mention that the exchange rate is a source of significant uncertainty, but he certainly didn’t give it the same level of emphasis” as in recent commentary, Robert Rennie, the Sydney-based head of currency and commodity strategy at Westpac Banking Corp., said of Stevens’s remarks, cited by Bloomberg. “The foreign-exchange market took that as a green light to move the currency higher.”

Meanwhile, demand for the US dollar was heightened after yesterday it became clear that US durable goods orders rose more-than-expected in February.

Durable goods orders rose 2.2% in February, sharply exceeding analysts’ expectations of a 0.8% increase and following a 1.3% drop in the previous month, data by the US Commerce Department showed today. The increase was mainly driven by orders for motor vehicles and parts, which jumped 3.6 percent last month, the biggest gain since February last year, data from the report revealed.

Shipments of the core durable goods, which exclude the volatile transportation items, rose 0.2% in February, slightly below analysts’ forecasts for a 0.3% gain and after a 0.9% advance in the previous month.

United States’ final annualized Gross Domestic Product probably expanded 2.7% during the last quarter of 2013, according to the median estimate by experts. The revised GDP, announced on February 28th, was 2.4% during Q4.

This is the widest indicator for nation’s economic activity. A larger than expected increase in the GDP figure would boost demand for the US dollar. The official result is to be released at 12:30 GMT.

Elsewhere, NZD/USD hit a session high at 0.8680 at 08:40 GMT, after which consolidation followed at 0.8678, adding 1.02% for the day. Support was likely to be received at March 26th low, 0.8671, while resistance was to be encountered at August 2nd 2011 high, 0.8784.