Australian Dollar Weakens As RBA Lowe Signals Willingness To Respond To Virus Crisis

The Australian dollar fell against its major rivals in the Asian session on Friday, after the Reserve Bank of Australia Governor Philip Lowe remarked that the central bank is prepared to act in response to challenges arising from the spread of the the Delta variant of coronavirus, if needed.

In his testimony before the House of Representatives Standing Committee on Economics, Lowe said that the board considered the scope for delaying the tapering of the bond buying program at its meeting earlier this week.

But the board expects that when restrictions are lifted spending will recover strongly, paving way for an economic rebound from the crisis.

"The pre-pandemic level of GDP was regained in the March quarter, more than a year earlier than we had expected in August last year. But it is in the labour market where the recovery has been most remarkable," Lowe said.

Further, the board expects a return to strong growth next year. Any additional bond purchases would have their maximum effect at that time and only a very small effect right now when the extra support is needed most.

The fiscal policy is the more appropriate instrument for providing support in response to a temporary and localised hit to income, he added.

The aussie weakened to 81.08 against the yen and 1.6018 against the euro, off its early highs of 81.31 and 1.5973, respectively. The currency is likely to find support around 78.00 against the yen and 1.65 against the euro.

The aussie dropped to 0.7380 against the greenback and 1.0477 against the kiwi, after rising to 0.7406 and 2-day high of 1.0505, respectively in early deals. The aussie is seen finding support around 0.70 against the greenback and 1.03 against the kiwi.

The aussie fell to a 3-day low of 0.9232 against the loonie, from yesterday's close of 0.9253. If the aussie slides further, 0.90 is possibly seen as its next support level.

Looking ahead, U.S. and Canadian jobs data for July, Canada Ivey PMI for the same month, U.S. wholesale inventories and consumer credit for June are due in the New York session.

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