The Australian dollar was the second strongest of the majors as Reserve Bank of Australia Governor Glenn Stevens issued hawkish comments.
Stevens said that Australian interest rates had probably bottomed and dismissed the notion that rising unemployment would lead the RBA to cut rates further, noting that the deterioration of the labor markets had been slower than previously feared. Following these statements, Credit Suisse overnight index swaps (OIS) shifted to price in 112 basis points worth of rate increases by the RBA over the next 12 months, compared to 98 basis points yesterday and 63 basis points a month ago. These moves will only make the Australian dollar stronger during times of strong risk appetite, but arguably weaker during bouts of risk aversion.