The Australian dollar rose today as it pushed towards 90 US cents following a strong afternoon rally on positive risk sentiment.
At the local close of trade, the dollar was buying $US0.8846, up almost 2 US cents from Friday’s close of $US0.8675.
CMC Markets foreign exchange dealer Tim Waterer said the Australian dollar opened strongly before drifting off in late morning trade and regaining ground later in the day.
On Saturday, China’s central bank pledged to make its tightly-controlled exchange rate more flexible after mounting international pressure, but when, and by how much, the currency will be revalued is not yet known.
‘‘Markets interpreted that news coming out of China as positive, particularly in terms of the Australian dollar and the effect the potential the appreciation of the yuan will have on the export market and that’s what’s driven the Aussie dollar significantly higher today,’’ Mr Waterer said.
He said the local unit dipped down to US$0.8755 mid morning.
‘‘The buying was probably a little bit overdone early on and a steady upward trend in the Asian markets saw it reclaim 88 cents before pushing higher this afternoon,’’ he said.
China kept the yuan exchange rate unchanged today, despite a weekend pledge by the central bank to make the currency more flexible.
The People’s Bank of China set the central parity rate - the centre point of the currency’s allowed trading band - at 6.8275 to the dollar, unchanged from Friday, but the spot rate pushed towards the higher end of the trading range.
Mr Waterer said there had been an unwinding of the US dollar positions which had been built up during the recent eurozone debt issues.
‘‘So that frenzied buying of the US dollar that we saw at the height of the European crisis has subsided this part week and that’s allowed the Aussie dollar to post those significant rises and move significant gains and move a couple of cents higher,’’ he said.
He forecast ‘‘more upside potential’’ for the local currency.
‘‘In the short term you’ve got European markets opening up and they’re likely to open with stronger gains in the euro and sterling and we could see more gains on the AUD,’’ he said. ‘‘The AUD is certainly within striking distance of making a run at 90 cents. That could happen sooner rather than later.’’
AAP