The Australian dollar has made gains overnight, buoyed by comments from US Federal Reserve presidents warning investors to stop over-reacting to a possible stimulus wind-down.
The Australian stock market also held firm today after falls on global markets.
Early this morning the local unit was trading at 92.49 US cents, up from 91.67 cents on Monday.
The local currency hit 91.48 US cents on Monday – its lowest point since September 2010 – after a Chinese bank cut its growth forecast for the world’s second biggest economy based on weaker-than-expected figures for last year.
Westpac New Zealand senior market strategist Imre Speizer said the Australian dollar’s bounce overnight may have been driven by the comments of two Federal Reserve presidents.
He said the comments calmed investors after chairman Ben Bernanke last week flagged a possible paring back of the central bank’s economic stimulus program which saw global currencies dive against a surging US dollar.
“The Fed speakers suggested that this knee-jerk reaction to tapering is overdone,” Speizer said.
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“It was, basically, three Fed speakers saying `you’ve overdone the reaction’ and markets probably backtracked somewhat because of that.”
Speizer said the local currency was likely to continue upwards to 93 US cents as the market awaits a raft of economic data from the US on Tuesday night, Australian time, including new home sales for May and June consumer confidence figures.
“It’s going to be a quiet day news-wise, which means the market will move around on sentiment alone and the sentiment of the last 12 hours is positive. So, I’ll expect the Aussie to continue climbing a little bit more,” he said.
Australian shares are marginally firmer as bargain hunters buy banking and retail stocks while resource companies falter.
Lonsec general manager of equities research Bill Keenan said stocks that stood to benefit from lower interest rates were being snapped up, a day after the market posted its biggest one-day loss in two months.
“There’s bargain hunting coming in,” he said.
“Clearly, stocks have come up off their intraday lows and it mainly seems to be yield orientation – banks and Telstra are pushing up.”
All the big banks were up, with ANZ adding 33 cents to $27.71, Commonwealth Bank rising 66 cents to $66.40, NAB gaining 32 cents to $29, and Westpac jumping 50 cents to $28.05.
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The major retailers were also higher, with Woolworths adding 20 cents to $31.95 and Wesfarmers putting on 43 cents to $38.46 while Telstra gained four cents to $4.54.
But resources stocks are in trouble, after China’s National Bureau of Statistics revealed the economy is growing at its lowest rate in 13 years.
BHP Billiton shed 33 cents, or 1.05 per cent, to $31.02, while diversified miner Rio Tinto fell 65 cents, or 1.26 per cent, to $50.89.
Newcrest shares have fallen to decade-long lows since $6 billion in writedowns were announced earlier this month, and were 16 cents weaker at $9.37.
The Chinese central bank has also ordered banks to strengthen liquidity management, which financial markets see as a sign there won’t be rate cuts.
“Whenever we see tightening credit conditions, it reminds us of the GFC (global financial crisis) period and everyone gets very nervous about that,” Mr Keenan said.
KEY FACTS
* At 1200 AEST on Tuesday, the benchmark S&P/ASX200 index was 17.7 points, or 0.38 per cent, higher at 4,686.8.
* The broader All Ordinaries index was up 11.1 points, or 0.24 per cent, at 4,662.2.
* The September share price index futures contract was 21 points higher at 4,654, with 18,496 contracts traded.
* National turnover was 634.8 million securities worth $1.66 billion.
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