australian-dollar-coin - AUD

AUD/USD is trading near its yearly high of 0.7276 while waiting for the Federal Reserve Economic Symposium. Traders expect the event to signal a continued policy stance, as earlier, on September 16 FOMC.

Asia/Pacific Data Fails To Curtail AUD/USD

China’s Industrial Profits surged by 19.6 Percent, but AUD/USD hardly reacted to the news. The pair posted higher highs and lows this week and is now targeting the 2019 high of 0.7295m helped by the lower than expected decline in Australia’s Private Capital Expenditure – to keep RBA on the sidelines for now. The reading used as a gauge for business investment fell 5.9 Percent in the second quarter of this year, much less than the expected 8.2 Percent decline.

The Reserve Bank of Australia would be happy with the readings as its current wait-and-watch approach could be extended to its next meeting on September 1. The central bank had indicated that the first-half downturn was lesser than anticipated. Also, the bank had ruled out negative interest rate as a policy tool.

Governor Philp Lowe might continue with the yield-target program, and Australia’s different approach in managing their monetary policy might help the Australian dollar to stay afloat against the US dollar. The greenback has been in weak position ever since the US central bank opened its coffers: to fund the purchase of Treasury securities and agency residential and commercial mortgage-backed securities. This purchase program would be continued at least at the current pace, according to the Fed’s earlier statement.

In the Fed Economic Symposium, market participants are looking for clues of changes in the emergency measures in 2021. If any indication in that direction comes forth, then there will be a material shift in the AUD/USD behaviour ahead. The FOMC minutes had discussed an outcome-based approach versus calendar-based forward guidance for monetary policy.

All said, the chances of significant shift is relatively rare, and the event may only confirm the current policy stance for the months ahead as the FOMC had voted earlier to extend the US Dollar liquidity swap lines through March 31, 2021. In that case, the Australian dollar might appreciate against the US dollar as the crowding behaviour in the pair looks strong to persist ahead.