Upbeat remarks by the Reserve Bank of Australia governor Glenn Stevens before a parliamentary committee lifted the Australian dollar on Friday morning in Asia.
Appearing before the Federal Parliament's House of Representatives Standing Committee on Economics in Canberra, the RBA governor was optimistic on the global economy, saying the recovery process around the globe gained traction.
Threat perceived of extreme financial instability in the Europe has abated, concerns surrounding the U.S. economy are subsiding and a slowdown in China's economy has come to an end, Stevens said.
While noting that rate settings are not aimed for a particular exchange rate response, Stevens said that recent cuts to interest rates were beginning to have an effect on the economy.
Inflation is seen consistent with the central bank target in next one to two years and the economy was close to trend growth in 2012, the RBA governor added.
"The cash rate has been reduced six times over the past 16 months, for a total decline of 175 basis points," and the central bank "stands ready to cut further if economic data suggests it is needed".
Stevens also said the central bank's decision to stand pat in its February meeting was prudent. However, he pointed out that the cash rate and lending rates are currently low and the RBA is ready to raise interest rate in the election year, if needed.
While saying that the high Australian dollar has been a relevant factor in setting rates, the Reserve Bank of Australia governor confirmed a "good deal of rate stimulus on the way".
The Australian dollar touched a 4-week high of 1.2797 against the euro following the remarks, up by more than 0.6 percent from Thursday's close of 1.2878.
With the pair staying in the 61.8 percent retracement target in its November-January rally, 1.2680 is seen as the next likely resistance level for the local currency, the pair's 50.0 percent retracement level.
The Australian currency also climbed to a 2-day high of 1.2340 against the New Zealand dollar, up 0.4 percent from yesterday's closing quote of 1.2290. The next barrier for the currency cross is seen at 1.2355/70.
The Australian dollar jumped to a 2-day high of 1.0310 against the US dollar, up 0.6 percent from previous session's close of 1.0248. The next key resistance level for the aussie-greenback pair is seen at 1.0370.
The aussie touched a key 1.05 level against the Canadian dollar after a gap of 3-days. Next major levels to watch for the aussie-loonie pair are at 1.0525 and 1.0550 in the near-term.
The Australian currency traded back above the 96.0 level against the yen following Stevens remarks, rising as high as 96.13, up 0.9 percent from Thursday's closing quote of 95.43.
Extension of the present bullish trend could help the aussie-yen pair challenge the key resistance level of 97.0 in the near-term.
Germany's fourth quarter GDP and the IFO business climate for February will garner market attention in the European session along with the European Union's winter economic forecasts.
Canada's consumer price index for January and retail sales for December are expected in the North American session.
by RTT Staff Writer
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