Australian dollar unchanged

The Australian dollar is unchanged Friday from 71.84 US cents on Thursday.

Yesterday, the local currency has surrendered a little of its recent gains as Sino-US trade talks ended without any clarity on when, or whether, a deal might be struck.

China’s commerce ministry said on Thursday the talks were extensive and detailed, but declined to provide any of those details.

In any case, the meetings were not at a ministerial level, so were never intended to produce a deal despite the markets’ fervent hopes for a speedy resolution.

The Aussie dollar faded back to 71.58 US cents after topping out at 71.94 US cents overnight, just short of chart resistance at 72 US cents.

It had support around 71.50 US cents.

The currency was still benefiting from a change in policy track by the US Federal Reserve, which had undermined one of the main props for the US dollar.

Presidents of four of the 12 Fed regional banks on Wednesday said they wanted greater clarity on the state of the economy before raising rates further.

Minutes of the Fed’s December meeting showed policymakers widely shared the view that risks from markets and abroad made the appropriate extent and timing of future hikes less certain.

“The only thing that likely gets the Fed to go faster at this point is a rapid and sustained move up in inflation. This seems unlikely in 2019,” said Tom Porcelli, chief US economist at RBC Capital Markets.

“Indeed, we think it is more likely that headline inflation undershoots the Fed target significantly in the quarters ahead,” he added.

“The Fed has set a very high hurdle for further tightening.”

The futures market has priced out all prospect of a rise this year, and sees even a small chance of a cut by December.

The Fed’s dovish turn joined up with soft inflation data out of China to underpin demand for fixed income debt.

Three-year Australian bond futures firmed three ticks to 98.220, implying an yield of 1.78 per cent.

As recently as September, the implied yield had been up at 2.225 per cent.

The ten-year bond contract rose 3.5 ticks to 97.7050.

 

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