Aussie Wins November, Shows No Signs of Slowing With RBA on Hold

  • Currency reaches six-week high as China services strengthens
  • Euro, Swiss franc, Colombian peso led declines last month

The Australian dollar was the big winner last month in the $5.3-trillion-a-day foreign-exchange market. So far, it’s showing no signs of cooling off.

The currency rallied to the highest level against its U.S. counterpart in six weeks after the Reserve Bank of Australia refrained from cutting interest rates and a report showed an improvement in China’s services industry. It was the only winner among 16 major currencies against the dollar in November and strengthened for a second month in a row versus the greenback, the first back-to-back monthly gain since June 2014.

The gains might not be over for the Aussie, which has strengthened following an improvement in consumer confidence and a jump in employment in October. The data suggested there was no immediate need to add further stimulus, said Reserve Bank of Australia Governor Glenn Stevens in a statement announcing his decision to keep the cash rate at 2 percent for a seventh straight month.

"The Aussie found pillars in fading expectations for more rate cuts," said Joe Manimbo, an analyst with Western Union Business Solutions, a unit of Western Union Co., in Washington. "As long as we can see signs of stabilization in China, that should increase the chance of the Aussie enjoying meaningful gains."

Losers

The euro posted its biggest monthly decline since March as economists surveyed by Bloomberg unanimously forecast the European Central Bank will announce additional monetary stimulus during their meeting this week. 

The 19-nation currency weakened 4 percent against the greenback in November, its biggest loss since a 4.2 percent decline in March, when the ECB embarked on its 1.1 trillion-euro ($1.2 trillion) asset-purchase program.

The Swiss franc weakened 4 percent against the greenback, its fifth consecutive monthly loss. The franc reached a five-year low on Nov. 27 as speculation mounted over whether the ECB’s decision to increase its quantitative easing will cause the Swiss National Bank to respond by weakening its own currency.

SNB President Thomas Jordan has repeatedly threatened that the central bank would intervene to weaken the "significantly overvalued" franc to protect Swiss exporters and boost inflation.

The Colombian peso had the worst month against the dollar among a basket of 31 major currencies. 

The peso weakened 8 percent as the country’s central bank chief speculated that inflation would increase before the end of the year. The drop in oil, coal, gold and coffee prices has caused the peso to weaken 24.4 percent in the past year.

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