Australian Dollar Falls as US Payrolls Approach; RBA Cut Chatter

 
   By James Glynn 
 

        SYDNEY--The blizzard conditions and dangerous snow drifts that paralyzed large swathes of the U.S. economy from Texas to New England a month ago will shape the trajectory of the Australian dollar this week.
        At 0710 GMT Monday, the Australian dollar was trading at US$0.7703, down from US$0.7800 late Friday.
        The world's biggest economy will report employment data for March on Friday and the data is expected to help cement the case for U.S. interest rates to be raised by midyear.
        Such is the momentum in the U.S. economy, it is forecast to add around 250,000 new jobs in March, building on the stellar 295,000 jobs added in February. Unemployment in the U.S. is expected to remain at 5.5% in March.
        Senior currency strategist at the Commonwealth Bank, Elias Haddad, said the Australian dollar is likely to come under pressure this week as the U.S. jobs report carries clear "upside risks."
        Rising U.S. interest rates will drive the U.S. dollar higher. A higher-than-expected U.S. jobs report could send the Australian dollar down to the near-fix-year lows around US$0.7600 reached in mid-March.
        Still, U.S. Federal Reserve Chairwoman, Janet Yellen, continues to indicate that the wheels of change in U.S. monetary policy will be slow. She told an audience in San Francisco before the weekend to expect almost glacial change.
        "If conditions do evolve in the manner that most of my colleagues and I anticipate, I would expect the level of the federal funds rate to be normalized only gradually," Ms. Yellen said.
        Talk of an imminent interest rate cut locally by the Reserve Bank of Australia will also pull the Australian dollar lower over the week.
        RBA officials continue to stress that the Australian dollar remains too high and a stiff headwind to recovery.
        Financial markets are priced for a cut at the RBA's policy meeting on April 7, taking the cash rate to a new record low of 2.0%. The cut would quickly flow through to mortgages and business loans.
        Still, the gloom that is returning to the Australian dollar could be short-lived, if China decides its floundering economy needs more support.
        Reports from China over the weekend suggest its central bank is growing worried about slowing growth. "There could be a glimmer of hope in it for the Aussie if the [People's Bank of China] elects to roll out more aggressive easing measures in the not-too-distant future," said Stephen Innes, senior trader at OANDA.
        Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        March 30, 2015 03:32 ET (07:32 GMT)

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