SYDNEY--The Australian dollar approached its highest levels in almost three weeks in Asia Friday after the European Central Bank announced measures to boost its economy.
By James Glynn
After months of a flagging economic performance, the ECB announced overnight a raft of measures aimed at boosting activity.
The ECB's measures included cutting its main interest rates, pushing its deposit rate into negative territory for the first time--meaning banks will effectively have to pay to park their cash at the central bank.
With Australian interest rates much higher by comparison to those in Europe, the Australian dollar got a boost from the ECB's announcement.
Sean Callow, currency strategist at Westpac says the Australian dollar's rising "yield advantage" could see it test US$0.9400 next week.
"Support seems to be coming from the ECB measures. Investors are looking for a place to put their money in a world of very low yields," Mr. Callow said.
At 0700 GMT the Australian dollar was trading around US$0.9333 compared with US$0.9283 late Thursday.
Strong domestic data this week has also supported the currency.
Data Wednesday showed the Australian economy grew by 1.1% in the first quarter from the fourth quarter and was up 3.5% from the same quarter a year ago. Exports drove the surge. It was the fastest pace of growth in two years, but economists said the pace of expansion would not be maintained in future quarters.
Reserve Bank of Australia Governor Glenn Stevens will speak in San Francisco next week, with markets looking to see how he views recent falls in commodity prices against the strength of Australian dollar.
The price of iron ore and coal, which combined make up 30% of Australia's exports, have fallen in 2014, while the Australian dollar has risen.
-Write to James Glynn at james.glynn@wsj.com
(END) Dow Jones Newswires
June 06, 2014 03:14 ET (07:14 GMT)
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