The Australian dollar rose strongly today on the back of strong local data but some analyst’s think the party may be coming to an end.
At 7.45pm (GMT) the Aussie dollar was trading at US76.86c up 0.91 percent from yesterday’s trade.
The NAB business conditions index released earlier today hit the market at 12, well above analyst’s expectations for a number of 8 marking its highest level since the global financial crisis.
NAB chief economist Alan Oster noted that the Australian economy is living up to the challenge,
“The lift in business conditions to these levels not only suggests that Australia is withstanding the uncertainty offshore, but that the recovery in the non-mining sectors of the economy have in fact stepped up a gear this month,” Mr Oster noted
. “It is particularly encouraging to see the employment index point toward ongoing strength in the labour market, supported by signs that the recovery is broadening into previous trouble spots such as manufacturing,” he said.
Analysts from Morgan Stanley think the Australian dollar’s recent rise is all smoke and mirrors and it’s only a matter of time before the currency reverses trend towards a target of US70c,
“We do not believe the Australian economy has turned the corner and expect more weakness ahead, leading to RBA rate cuts and a weaker AUD”. Noted Morgan Stanley’s Jessica Liang,
“AUD needs to weaken further to ensure net trade doesn’t turn into a drag on real GDP. Australia also needs a weaker AUD to help with its deteriorating external accounts” she added.
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