Strewth, Bruce

by | Jul 17, 2014

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Neil Davies, Head of Trading at  PlutusFX, reports on the recent strength of the Australian currency

The Aussie Dollar has had a good run this year against the USD. From a low of 0.866 at the end of January it has risen steadily to sit at AUD/USD 0.937 today. The Aussie hasn’t been able to gain on Sterling to the same extent over the period, but has fared well against what has been a good year for Sterling, with GBP/AUD sitting at around 1.86 at the start of the year, with today’s rate being 1.825.

The Chinese growth figures released this week should have provided a bolster for the Aussie. China’s Economy grew by an annualised rate of 7.5% in Q2, up from 7.4% in the previous quarter – such stable growth apparently achieved by economic policies designed to enhance steady, rather than spectacular growth, alongside hopes that the predicted housing bubble will be offset by continued urbanisation. However, the AUD has simultaneously come under pressure from a dovish Reserve Bank of Australia.

The Australian business confidence index has also seen a drop in Q2 to a level of ‘6’ down from a ‘7’ in Q1. This effectively recognises the AUD strength is having on the domestic economy by hurting exporters. Consumer confidence has also seen a downturn following the government’s most recent budget.

All told, it’s unlikely this year’s strength will start to increase, if anything it may taper. The only likely change to this would be a sudden rebound in lacklustre commodity prices.

Neil Davies, Head of Trading, PlutusFX

 

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