The Australian share market has closed lower as investors took profits, and the Australian dollar has retreated as Reserve Bank of Australia deputy governor Guy Debelle hosed down speculation that the RBA was moving towards hiking interest rates.
The benchmark S&P/ASX200 index was down 0.7 per cent to 5,722.8 points on Friday, with the major banks, miners and energy stocks all weaker.
The Australian dollar dramatically retreated from its recent surge towards 80 US cents, falling below 79 US cents before resuming its advance to be trading at 79.08 US cents at 1630 AEST, from 79.24 US cents on Thursday.
The Aussie has gained strength after the RBA’s recent discussion of the “neutral” cash rate – which the RBA suggests is 3.5 per cent – as well as from Thursday’s upbeat jobs report and a soft US dollar.
But the local unit plunged half a US cent after Mr Debelle said in a speech in Adelaide on Friday that markets should not interpret as significant the RBA’s discussion of the neutral cash rate.
The neutral cash rate is the theoretical level which neither stimulates nor dampens economic activity.
ThinkMarkets senior market analyst Matt Simpson said Mr Debelle had wasted no time in trying to tame the Australian dollar’s rally.
“Reiterating that a higher currency removes the benefits of growth for Australia, Debelle came out swinging today,” Mr Simpson said.
ASR Wealth Advisers client adviser Gary Huxtable said the Australian share market opened lower on Friday in the wake of weak overseas leads and with investors feeling risk-averse.
The market regained some of its losses following Mr Debelle’s speech as it allayed fears of a hike in interest rates but the again turned downwards at the end of the session.
“There’s a lot of risk on a nightly basis at the moment and investors at the moment are wary of the overall position of the market, and you can easily see the short-term profits,” Mr Huxtable said.
The major banks – Westpac, ANZ, Commonwealth Bank and National Australia Bank fell between 0.5 per cent and 1.1 per cent, with National Australia Bank the worst performer..
Among the major miners, BHP Billiton lost 1.9 per cent, Rio Tinto descended 2.1 per cent, and Fortescue Metals surrendered 2.5 per cent after a the iron ore price dropped by 3.2 per cent.
Lower oil prices weighed on oil and gas producer Woodside Petroleum, which lost 1.6 per cent, and Santos, which fell 0.3 per cent.
Primary Health Care lifted three cents, or 0.8 per cent, to $3.63 despite the company revealing it will take a $575 million hit in its full-year results after deciding to write down the value of its medical centres.