The Australian dollar edged back today as a three session rally drew some profit taking, though it held most of its recent gains helped by expectations of extended stimulus in the Unites States.
The Aussie was supported by domestic data showing a healthy 2.9% rise in job advertisements in November which augured well for an upbeat reading from the official employment report due on Thursday. Analysts are looking for a solid rise of around 19,000 in employment and a drop in the jobless rate back down to 5.2%. Such a result would help offset a run of softer data recently and keep the Reserve Bank on inflation watch.
“Jobs should remain an ongoing key support to household income – which coupled with an on-hold RBA over coming months – should help consumption to pick-up ahead, after some patchiness recently,” said George Tharenou, an economist at UBS.
The Reserve Bank of Australia has, as expected, held interest rates unchanged at 4.75% and Governor Glenn Stevens said the market was reasonable in pricing in the next move around mid 2011. With the next interest rate rise in Australia likely to be months away and the markets expecting a slowdown in the rate of growth in the Chinese economy to control inflationary pressures sapping demand for Australian raw materials. The RBA forecasts Australia’s economy to expand 3.5% in 2011 from the average 2.7% in the first three quarters of this year with inflation and employment seen picking up in line with economic growth.
“The terms of trade are at their highest level since the early 1950s, and national income is growing strongly as a result,” Stevens said.
The RBA chief said private investment had recently started to pick up in response to high levels of commodity prices, while spending and borrowing in the housing sector continued to show signs of caution, leading to a “noticeable increase” in the saving rate. The assessments are broadly in line with Stevens’ testimony to the House Representatives’ economics committee last month, where he said it was “reasonable” to assume no further rate hikes will be imminent from the central bank for some time. The RBA has been one of the most aggressive of the major central banks in raising interest rates following the global downturn. The nation’s economy has enjoyed a robust rebound led by voracious demand for its abundant mineral resources from China and India.
Written by Tony Redondo