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Australian Dollar strongest of the majors
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Thursday, 16 April 2009 |
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The Australian Dollar ended last week as the strongest of the majors, and the currency was especially strong against the Euro, Swiss Franc, and British Pound. The moves came despite the fact that the Reserve Bank of Australia cut rates by 25 basis points to 3.00 percent on April 7th. The support for the currency came from RBA Governor Glenn Stevens’ policy statement, as he suggested that they may pursue a neutral stance going forward since domestic interest rates are now “at very low levels by historical standards” and “there are tentative signs of stabilization in several countries, including China.” The biggest driver of Australian Dollar strength however, was the broad based pickup in investor sentiment that led other ‘risky’ assets to climb, including equities, in the middle of last week.
Risk trends will likely remain the primary driver of commodity currencies like the Australian Dollar going forward, especially as there is little in the way of major economic data releases this week. The data that is released is anticipated to show that inflation pressures eased during Q1, as import price growth is likely to fall from a more than 22-year high of 10.8% while export prices may slip from an all-time high of 15.9%. This news could weigh on the Australian Dollar in anticipation of further rate cuts, but if import and export costs fail to ease, the currency may gain.
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