The Australian Dollar hit 77.03 US cents on 10 August before retreating to close at 76.91 US cents at 4 p.m. on Friday 12 August. The strength of the Aussie is due to the relative value of the AUD against major currencies and the perceived nature of its short term "overvalued" status. We are of the opinion that the Aussie will retreat as we get closer to the November RBA meeting date where the market is expecting another round of rate cut as inflation is likely to trend well below the RBA's 2%-3% band.
The rise in the AUD can be attributed to a number of factors. If we do not see a rate action by the RBA until November and with the US Federal Reserve reluctant to lift rates citing weak global economic outlook, these two factors provide a fair tailwind to the AUD. Add the rise in iron ore prices, we have a pretty bullish effect on the currency. However we do believe that the rise in the value of the AUD is over a short term period; perhaps until the RBA November rate decision and if prices of iron ore registers a fall. The Chinese demand for the metal cannot be confirmed from manufacturing and housing data in China leading to speculation that there might be some stockpiling activity before the market braces for a fall in iron ore prices towards the end of the calendar year.
The rise in the AUD can be attributed to a number of factors. If we do not see a rate action by the RBA until November and with the US Federal Reserve reluctant to lift rates citing weak global economic outlook, these two factors provide a fair tailwind to the AUD. Add the rise in iron ore prices, we have a pretty bullish effect on the currency. However we do believe that the rise in the value of the AUD is over a short term period; perhaps until the RBA November rate decision and if prices of iron ore registers a fall. The Chinese demand for the metal cannot be confirmed from manufacturing and housing data in China leading to speculation that there might be some stockpiling activity before the market braces for a fall in iron ore prices towards the end of the calendar year.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Industrial Average Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) Iron Ore | As at 12-Aug 1.50 1.75 1.86 1.51 0.7691 0.6903 78.50 5.1103 5,530 2,184 18,576 3,050 46.97 1,337 60.37 | As at 5-Aug 1.50 1.79 1.96 1.59 0.7660 0.6877 77.40 5.0902 5,497 2,182 18,543 2,976 44.27 1,332 60.74 |
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