- Treasurer appoints Philip Lowe to replace Glenn Stevens at RBA
- Currency had slumped 2.7% in prior two days as RBA cut rates
Australia’s dollar climbed from a seven-week low after a government report showed retail sales rose more in March than economists forecast. Gains were maintained after the government said Philip Lowe would take over as central bank governor in September.
The currency rose versus all except one of its 16 major peers as separate data showed the trade deficit narrowed more than analysts predicted. The Aussie had slumped 2.7 percent in the previous two days after the Reserve Bank of Australia lowered its benchmark by a quarter point to 1.75 percent and traders bet it would cut again in the next 12 months. The nation’s bonds rose for a third day, pushing yields lower.
“The economic data released today supports a rally in the Australian dollar,” said Richard Grace, chief currency and rates strategist at Commonwealth Bank of Australia in Sydney. “However, in the current environment, we don’t believe the Aussie will be that strong partly because Australian bond yields have not moved higher on the economic data and partly because it will take at least until the end of the trading week before participants put the surprise RBA rate cut behind them.”
Australia’s dollar gained 0.7 percent to 75.09 U.S. cents as of 7:55 a.m. in London after dropping to 74.47 on Wednesday, the lowest level since March 16. The benchmark 10-year bond yield fell four basis points to 2.39 percent after touching 2.37 percent, the lowest since March 1.
Wednesday’s low for the currency was close to the 38.2 percent retracement of the Aussie’s advance from a seven-year low of 68.27 cents on Jan. 15 to a 10-month high of 78.35 on April 21. That’s a level some technical traders see as providing support, based on Fibonacci analysis.
Lowe will take over from Glenn Stevens as the RBA governor for a seven-year term from Sept. 18, Treasurer Scott Morrison said in a statement Thursday. He joined the RBA in 1980 and since then has obtained a PhD from Massachusetts Institute of Technology and had a stint at the Bank for International Settlements. Lowe was appointed deputy governor in February 2012, when Stevens described him as an “exceptional” economist.
“The appointment will be welcomed by the market because Lowe is a solid and known individual,” said Commonwealth Bank’s Grace. “He doesn’t hold wildly diverging views to the current governor and so we probably won’t see much of a reaction from the market.”