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Australian dollar tumbles on Greenback strength
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Published on 26.05.2015 19:31

The Australian dollar is sharply lower today after better than expected data from the US raised expectations that an interest rate hike in the nearest future was still well and truly on the table.

AT 1.25pm (AEDT) the Aussie dollar was trading at US77.32c down from a high of US78.37 in yesterday’s trade.

New home sales in the US rose 6.8% after last month’s -10% drop while the durable goods number came in at 0.5% against a consensus of 0.3% giving the US central bank more ammunition to tighten monetary policy.

 "The market took her words to mean that the Fed is committed to a path towards normalization and that a hike in the Fed Funds rate is now just a matter of when rather than a question of if," BK Asset Management's managing director of foreign exchange strategy Boris Schlossberg wrote in a note.

"It appears that after several weeks of counter trend rallies, the buck is back," he added.

Many blamed the harsh weather in the US for the recent string of bad data but it seems like that is all over as we head into the warmer months,

"It does appear that a spring rebound is developing," economist Paul Ashworth of Capital Economics wrote in a note to clients.

The Iron ore price has underpinned the Australian dollar in the last few weeks rising nearly 10% since the start of April but many analysts don’t expect the rally to last with any pullback in the price likely to add further pressure to the Aussie dollar in the coming weeks.

The Reserve bank of Australia in a speech last week also left the door open for a further rate cut if needed in the coming months adding to the 50 basis points reduction


Andrew Masters

Analyst

The power of leverage is the power of Forex.
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