The Australian dollar hit resistance above the 0.83 level against the US dollar as underlying risk aversion curbed demand for the local currency. The currency resisted losses below the 0.80 level and confidence gradually improved over the second half of the week.
The current account deficit increased to AUD16bn for the second quarter from a revised AUD15.6bn previously. The data failed to have a significant impact as the July trade deficit narrowed.
There was a stronger than expected 0.9% retail sales increase for August, but Australian dollar moves were still dominated by international risk tolerance levels.
Given the underlying tightening of credit, the Australian dollar is likely to face difficulties in extending the recovery against the US currency, although choppy trading conditions will persist.
Canadian dollar
Despite volatile moves, the Canadian dollar held little changed within a 1.05 -1.0650 range against the US currency during the week.
The currency tended to lose ground when risk aversion increased as carry trades were scaled back while stronger global stock markets supported the currency. The Canadian current account position remained comfortable for the second quarter at CAD8.4bn while the producer prices data had little impact.
Merger activity provided further support to the currency with a proposed USD1.1bn US Steel bid for Stelco and rumours of further bid activity.
Overall, the US dollar is likely to find support below the 1.05 level against the Canadian currency, but there is only limited scope for US currency gains.
Indian rupee
The rupee has been unable to make any significant headway as credit fears persisted and weakened to near 41.20 on Thursday. Losses were still generally contained with a move to 41.05 on Friday.
There was limited buying of Indian stocks during the week and stock market gains supported the rupee on Friday, but there was still caution as credit fears persisted.
The Indian currency was hampered late in the week by month-end dollar demand from oil importers. GDP growth rose 9.3% in the year to the second quarter which supported confidence in the economy.
Political fears remained an important background focus with continuing fears over opposition to a nuclear agreement with the US.
The underlying credit tightening is likely to weaken the rupee with volatility remaining relatively high, although currency losses should be measured.