The latest release of the Reserve Bank of Australia's Minutes of the Policy Meeting highlighted a sluggish economic growth in China and the European debt crisis that drove the decision of the central bank to lower the benchmark interest rate to 3.25 percent. But latest figures showing that Chinese exports picked up and money supply posted better figures in September, together with news that Moody's Investors Service maintained Spain's credit rating, the Aussie is likely to sustain versus the Yen in today's Asian trading exchanges.
Signs that China's economy is stabilizing are seen to lend support to the Australian currency, given that China is Australia's single largest export market. RBA Governor Glenn Stevens noted in the minutes that stalling Chinese exports and contracting European demand as the primary reasons for the recent RBA interest rate decision, and significant improvement in the Chinese economy is expected to buoy the Aussie. In Europe, Moody's holding of Spain's credit rating also came as a relief to the Aussie, increasing appetite for riskier assets. The ratings agency cited the effort of the European Central Bank (ECB) to buy government bonds to help lower borrowing costs. It also lauded the reforms undertaken by the government to strengthen the country's banking sector. Prior to this, there were already speculations that Spain would be receiving another downgrade from Moody's so the result was deemed as positive for the Aussie.
Meanwhile, the affirmation of Spain's credit rating came as negative for the Samurai, as demand for safer assets weakened. Also seen to weigh on the Yen are easing fears regarding corporate earnings, after Goldman Sachs' quarterly earnings report exceeded expectations. Thus, a long position is recommended for the AUD/JPY pair in today’s Asian trades.
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