Australian dollar strengthens against US dollar as Europe hints at stimulus

The Australian dollar has strengthened on US dollar weakness after the European Central Bank hinted that economic stimulus was imminent.

Late on Friday, the currency was trading at 72.55 US cents, up from 71.96 cents on Thursday.

Commonwealth Bank currency strategist Joseph Capurso said a weaker US dollar had boosted the local currency alongside the New Zealand dollar and the Canadian dollar.

“The greenback was a bit softer,” Capurso said. “Asian equity markets were stronger on the back of the European Central Bank commentary.”

Capurso said the local currency hardly moved after ANZ and NAB became the last major lenders to announce an increase in their standard variable rates.

The move could be seen as a possible cue for the RBA to cut its cash rate, but Capurso said the currency had already responded to Westpac’s move earlier this week.

At 5pm on Friday the Australian dollar was at 87.51 Japanese yen, up from 86.14 yen on Thursday, and at 65.28 euro cents, up from 63.52 euro cents.

The Australian bond market is also firmer based on the European Central Bank commentary.

RBC Capital Markets fixed income strategist Michael Turner said bond futures rallied two basis points on the news from the European Central Bank.