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Australian Dollar Declines On Concerns About Fed Stimulus

The Australian dollar slipped against other major currencies in the Asian session on Thursday, as upbeat U.S. housing data sparked worries about the outlook for the Federal Reserve's stimulus program.

The report from Commerce Department said yesterday that U.S. new home sales surged up by 8.3 percent to an annual rate of 497,000 in June from the revised May rate of 459,000. With the increase, new home sales reached a five-year high.

The report made investors to assess that the Fed may trim its monthly bond buying program sooner.

Markets are also expecting a 60% chance for an interest rate cut by the Reserve Bank of Australia in the August meeting, given weak inflation and soft economic growth. The official interest rates in Australia now stands at a record low of 2.75 percent.

The aussie declined to 0.9129 against the U.S. dollar for the first time since July 16. If the aussie collapses further, its next likely support lies around the 0.90 level.

The aussie reached 1.1461 against the kiwi, a level not seen since November 2008. On the downside, 1.13 is seen as the next support level for the aussie.

The Reserve Bank of New Zealand left its benchmark Official Cash Rate unchanged at 2.50 percent, and said the rate is likely to remain low through the rest of the year.

"Growth in the New Zealand economy is picking up and, although uneven, is becoming more widespread across sectors," said RBNZ Governor Graeme Wheeler in a statement accompanying the decision announcement."Although removal of monetary stimulus will likely be needed in the future, we expect to keep the OCR unchanged through the end of the year."

The aussie hit a 10-day low of 0.9419 against the loonie, retreating from a 2-day high of 0.9595 set on Wednesday. The next support for the aussie is seen around the 0.93 level.

The aussie touched 1.4450 against the euro, lowest since July 12. Further bearish trend may see the aussie targeting support around the 1.46 area.

The aussie slipped to a 9-day low of 91.44 against the yen, compared to Wednesday's closing value of 91.68. The aussie may face support around the 90.00 area.

An index measuring corporate service prices in Japan was up 0.4 percent on year in June, the Bank of Japan said today, standing at 96.3.

That missed expectations for an increase of 0.6 percent following the 0.3 percent gain in the previous month.

German Ifo business climate index for July is due in the European session.

From the U.S., durable goods orders for June and weekly jobless claims for the week ended July 20 are set for release in the New York session.

by RTTNews Staff Writer

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