26 Mar 2014
UAD/USD remains bullish on Stevens' comments and Beijing stimulus bets
FXStreet (London) - The Australian dollar remains bullish following comments from Reserve Bank of Australia governor Glenn Stevens. The Aussie dollar has also been given some support by increasing bets that Beijing will roll out stimulus measures to prop up the Chinese economy following a slew of weak data.
Cautiously bullish
Speaking in Hong Kong, Stevens predicted a boom in Australian housing construction, however warned that he had concerns over the level of leverage in the market. “We are going to have a boom in residential construction over the next couple of years. That is very much on track,” said Stevens.
Addressing AUD strength, something that the RBA governor has frequently tried to jawbone down, Stevens said that: “The long-running equilibrium of the exchange rate is probably lower and we have been quiet consistent in saying that.” Stevens added: “Happily enough the currency is now well down off its peak. From here it really depends what you think the fundamentals will do.”
Chinese demand
Stevens also addressed the issue of weakening Chinese demand as economic indicator continue to point to a slowing economy.
“Given that the growth target was more than met last year, and given that the Chinese New Year holiday period makes it more difficult to assess trends in the data, it may be a little too early to draw strong conclusions.”
Stevens added: “In fact people may be too inclined to fret over what are still relatively small movements in monthly PMIs and the like in China.”
Bets on Beijing help increase
Stevens’ comments come as expectations increase that Beijing will step in to prop up the Chinese economy following consistently weakening data and indices. The flash Markit/HSBC PMI fell to an eight-month low of 48.1 in March from February's final reading of 48.5. The index has remained below 50 since the beginning of the year, indicating a contraction, with the brunt of the slowdown coming from weakening domestic demand.
Any measures from Chinese central planners are likely to come from increased infrastructure spending. However, there is also the possibility that authorities will move to lower banks’ reserve requirements in the aim of freeing up private lending.
The speculation has helped to support the Aussie dollar on expectations that any increased infrastructure spending will support Australian commodity exports.
AUD/USD is currently trading at USD0.9228, up 0.71 percent on the open of USD0.9161, down slightly from a session high of USD0.9235.
Cautiously bullish
Speaking in Hong Kong, Stevens predicted a boom in Australian housing construction, however warned that he had concerns over the level of leverage in the market. “We are going to have a boom in residential construction over the next couple of years. That is very much on track,” said Stevens.
Addressing AUD strength, something that the RBA governor has frequently tried to jawbone down, Stevens said that: “The long-running equilibrium of the exchange rate is probably lower and we have been quiet consistent in saying that.” Stevens added: “Happily enough the currency is now well down off its peak. From here it really depends what you think the fundamentals will do.”
Chinese demand
Stevens also addressed the issue of weakening Chinese demand as economic indicator continue to point to a slowing economy.
“Given that the growth target was more than met last year, and given that the Chinese New Year holiday period makes it more difficult to assess trends in the data, it may be a little too early to draw strong conclusions.”
Stevens added: “In fact people may be too inclined to fret over what are still relatively small movements in monthly PMIs and the like in China.”
Bets on Beijing help increase
Stevens’ comments come as expectations increase that Beijing will step in to prop up the Chinese economy following consistently weakening data and indices. The flash Markit/HSBC PMI fell to an eight-month low of 48.1 in March from February's final reading of 48.5. The index has remained below 50 since the beginning of the year, indicating a contraction, with the brunt of the slowdown coming from weakening domestic demand.
Any measures from Chinese central planners are likely to come from increased infrastructure spending. However, there is also the possibility that authorities will move to lower banks’ reserve requirements in the aim of freeing up private lending.
The speculation has helped to support the Aussie dollar on expectations that any increased infrastructure spending will support Australian commodity exports.
AUD/USD is currently trading at USD0.9228, up 0.71 percent on the open of USD0.9161, down slightly from a session high of USD0.9235.