Australian Dollar Rallies From Six-Year Lows

 
  By James Glynn 
 

        SYDNEY--The Australian dollar fell to a fresh six-year low in early trading in Asia on Monday before rallying sharply on comments by New Zealand's Prime Minister John Key.
        Mr. Key said the recent fall in the New Zealand dollar was faster than expected and is helping support the economy, as are lower interest rates. Mr. Key added that the economy is "still growing at a respectable rate" despite recent challenges, including plummeting dairy prices.
        Mr. Key's remarks came amid rising expectations in markets that the Reserve Bank of New Zealand will cut interest rates by 50 basis points at a policy meeting on Thursday, in part to put pressure on the New Zealand dollar.
        Mr. Key's optimistic comments prompted some scaling back of those rate cut bets, lifting the Kiwi.
        The Australian dollar has faced volatility as expectations rose that Australia's central bank might soon come under pressure to follow its counterparts in New Zealand and Canada. Canada cut rates last week. But by taking pressure off the New Zealand dollar, some pressure also came off the Australian dollar.
        "The Aussie, the Kiwi and the Canadian dollar are all being tarred with the same brush," said Ray Attrill, head of currency strategy at National Australia Bank.
        Australia's central bank meets in early August.
        Wednesday may see volatility return to the Australian dollar as the government statistician will publish inflation data for the second quarter. Inflation is expected to remain benign, giving the RBA scope to cut interest rates further should it see the need.
        RBA Gov. Glenn Stevens will also speak on Wednesday. No topic for his speech has been given.
        Earlier in trading, the Aussie touched a six-year low as traders reacted to a fall in the price of gold.
        "The morning selloff to new lows dating to 2009 looked to be driven by the tumble in the gold price, which sparked memories of the April 2013 gold "flash crash," said Sean Callow, currency strategist at Westpac.
        At 0650 GMT, the Australian dollar was trading at US$0.7386, down from US$0.7403 late Friday. It traded as low as US$0.7328.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        July 20, 2015 03:24 ET (07:24 GMT)

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