Aussie Ends Friday with Gains, Frustrating Stevens

The Australian dollar ended Friday with gains even though the central bank’s chief signaled that policy makers would like the currency to weaken. The Aussie was still down heavily over the week, being the worst performer among most-traded currencies.

Reserve Bank of Australia Governor Glenn Stevens explained that weaker currency is preferable to lower interest rates as a way to boost economic growth, saying that AUD/USD at 0.85 is “closer to the mark”. He added that costs of an intervention outweigh benefits so far, but this does not mean that policy makers will not consider such measure in the future if things will not improve. Export-oriented economies often prefer their currencies to be relatively weak as it boosts profits from selling goods overseas.

The Aussie also suffered from risk aversion caused by speculations about possible monetary tightening by the US Federal Reserve. Meanwhile, the RBA retains bias to monetary easing, which hurts the currency too.

AUD/USD jumped from 0.8935 to close at 0.8957 and AUD/JPY ticked up a little from 92.36 to 92.46. EUR/AUD went from 1.5386 to the closing price of 1.5332.

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