During early deals on Thursday, the Australian dollar soared to its highest level in nearly 3-months against the euro and 7-months against the loonie as Australia's trade surplus increased more-than-expected in February.
The Australian Bureau of Statistics said today that Australia posted a seasonally adjusted trade surplus of A$2.1 billion in February, sharply higher than analyst expectations for a surplus of A$700 million and following the A$970 million surplus in January.
Imports were down 1 percent month-over-month, falling to A$22.82 billion from A$22.96 billion in January, the report said. Exports jumped 4 percent, climbing to A$24.93 billion from A$23.88 billion in the previous month.
The Aussie also climbed to new multi-day highs against the dollar and the yen on the back of strong equities.
The stock markets across the Asia-pacific region opened sharply higher today, tracking the U.S. markets, where all the indices advanced for the second day in succession on unexpected positive economic data.
The positive economic reports encouraged traders by suggesting that the worst of the economic conditions may be behind us. The data also strengthened expectations that the government initiatives are starting to bear fruit.
The low-yielding currencies like the U.S. dollar and the yen fell with the jump in equities as investors sell them to invest in riskier assets. Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attracting investors to the South Pacific nations' higher-yielding assets.
While speaking at the Urban Development Institute of Australia in Brisbane, Reserve Bank of Australia Deputy Governor Ric Battellino said this week that disciplined monetary and fiscal policies in the earlier years, sound regulation and a prudent approach to lending by banks helped the country enter the difficult situation in a much better shape than other countries.
The Australian dollar hovered near a 3-month high of 1.8864 against the euro compared to Wednesday's closing value of 1.8951. The next upside target for the Aussie is seen around the 1.864 level.
The euro is under pressure ahead of an expected interest rate cut by the European central Bank. Analysts expect the ECB to trim interest rate by 50 bps to a record low of 1.00%. Investors also anticipate that the ECB may adopt unconventional measures such as printing money. Both the Fed and the Bank of England started the so-called quantitative easing in order to boost their ailing economy.
Gloomy economic reports from the Euro-zone also added pressure on the ECB to slash interest rates. Unemployment in the euro zone jumped more than expected in February to 8.5 percent, data showed yesterday. Euro-zone economic sentiment indicator hit a new all-time low this month showing that the euro-zone economy will continue to decline in the first quarter of this year.
Before the ECB meets today, the French producer price index for February is slated to be released in the European session. Analysts expect the index to drop 3.4 percent year-on-year in February.
The Australian dollar jumped to its highest level since September 04, 2008 against the Canadian dollar during Thursday's early trading. At about 2:10 am ET, the Aussie-loonie pair hit as high as 0.8846, compared to 0.8815 hit late Wednesday in New York. On the upside, the Aussie may likely find resistance near the 0.896 level.
Following a weak retail sales report, which was released earlier this week, analysts expected the Reserve Bank of Australia to cut its interest rate this month. But today's better-than-expected trade surplus figures will be considered when the policy makers meet next week.
The RBA's current rate stands at a record low of 3.25% following a 400 basis points reduction since September last year.
With the advance, the aussie-loonie pair continued to move away from a 13-year low of 0.7731 hit on February 02 and has gained around 12.55% since then.
The Australian dollar also climbed to new multi-day highs against the currencies of U.S. and Japan during Thursday's early deals. The Aussie hit highs of 0.705 against the dollar and 69.6 against the Japanese unit compared to Wednesday's closing values of 0.6995 and 68.93, respectively. If the aussie strengthens further, the Aussie-dollar pair may likely target the 0.71 level and Aussie-yen pair may target 70.5 level.
In economic news from Japan, the monetary base grew 6.9 percent year-over-year in March, to 94.46 trillion yen, according to a report released by the Bank of Japan. That's up from 93.65 trillion yen in February, which saw a 6.4 percent annual increase. On a seasonally adjusted basis, the monetary base was up 5.6 percent month-over-month at 94.3 trillion yen.
Market players are also keeping a close eye on possible steps for the recovery in the global economy from the G20 meeting, which will kick off today. The G20 summit comes just two days after the forecasts issued by the Organisation for Economic Co-operation and Development, or OECD, and the World Bank revealed a bleak picture of the global economy in 2009. The OECD forecast the world economy to contract 2.7% in 2009. At the same time, the World Bank lowered its projection to a 1.7% decline from a just 0.9% contraction predicted initially.
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