Bell FX Currency Outlook: Australian dollar benefits from comments that China may expand the daily CNY trading band (currently +/- 1%) and establish a managed float.

Australia: The AUD began this morning a touch higher, trading at around USD 0.9425 after comments by PBoC Governor Zhou, suggested that the PBoC would reduce holdings of matured US Treasuries and is looking to end domestic FX interventions, as it gradually moves towards a market-based floating exchange rate.

These headlines saw currencies typically associated with diversification away from USD, such as the AUD and NZD, benefit. Yesterday in Australia, the RBA November Board Minutes suggested the Bank is comfortably on hold.

While the Bank remains open to the possibility that rates may still need to be lowered further, this is a very mild ‘non-active’ easing bias and would require a weaker outlook for the economy than the RBA’s current (downgraded) growth forecasts.

The Minutes were a little more positive and highlighted the pick-up in consumer and business confidence and some other generally more positive forward looking economic indicators.

Today, Treasury Secretary Martin Parkinson will appear before a Senate Economics Committee in Canberra today as part of the 2013-14 Supplementary Budget Estimates. He is likely to be questioned by Senators on the necessity of lifting the debt ceiling to AUD500bn (rather than the opposition party’s proposed AUD400bn).

Treasury’s advice to the Government on the recent AUD8.8bn capital injection to the Reserve Bank of Australia, public sector job cuts and their impact on the budget and estimates of uncertainty around Treasury’s budget forecasts, among other things. Also today, Assistant Governor (Financial Markets), Guy Debelle, speaks on Legacies from the financial crisis: some ongoing areas of concern.

Majors: The euro lost some ground after the German ZEW Survey fell short of expectations, with the current situation index falling to 28.7 in
November (31.0 expected) from 29.7, although the expectations index did rise to 54.6 (54.0 expected), the highest level in over four years. But the EUR did find some support after ECB Vice-President Constancio said that quantitative easing was ‘a possibility and nothing else’. EUR at about 1.3530 this morning.
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