The Australian dollar fell from its highest level in almost two months against the greenback as traders speculated that the currency’s biggest advance in more than a year yesterday had been too rapid.
Demand for the so-called Aussie was also dented before the nation’s central bank meets Nov. 1 amid bets Governor Glenn Stevens will cut interest rates to 4.5 percent. The New Zealand dollar, known as the kiwi, retreated from near a five-week high. Both South Pacific nations’ currencies were still headed for a five-day gain as easing concern about Europe’s debt crisis and signs of U.S. growth supported demand for high-yielding assets.
“In the short term, you will get a bit of a pullback as a standard correction following strong rallies,” said Richard Grace, the Sydney-based chief foreign-exchange strategist and head of international economics at Commonwealth Bank of Australia. “We have a forecast of $1.04 for the Aussie by year- end and we feel very comfortable with that.”
The Australian dollar fell 0.5 percent to $1.0672 as of 2:05 p.m. in Sydney from $1.0730 yesterday in New York when it touched $1.0753, its highest level since Sept. 1. The currency weakened 0.7 percent to 80.93 yen from yesterday, when it rose 2.9 percent. The Australian dollar’s 3.2 percent gain against the U.S. dollar yesterday was the biggest since May 2010.
New Zealand’s dollar weakened 0.3 percent to 82 U.S. cents after earlier touching 82.43, the most since Sept. 21. The kiwi fell 0.5 percent to 62.19 yen.
The Aussie’s 14-day relative strength index versus the dollar reached 69 yesterday, near the 70 level that signals to some traders that an asset’s price has risen too quickly and may be set to reverse direction.(Bloomberg)
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