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RBA to dictate Aussie dollar
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Published on 18.03.2016 20:49

The Australian dollar continued its stellar run on Friday, threatening to break through the US77c mark before retreating in late trade to finish off the week at US76.03c.

The catalyst for the sharp jump was Thursday’s decision form the US Federal Reserve to keep rates on hold which most in the market had been expecting.

The real shock came in the following monetary statement with the Fed noting that global economic growth and low inflation would reduce the number of expected rate rises this year.

With Iron ore and oil prices on the rebound, and the significant interest rate difference between the Aussie dollar and most major currencies playing into the hands of carry traders, it may be left to the Reserve Bank of Australia to drive the currency lower.

Although the RBA is not predicted to cut rates for some time, analysts expect them to start talking down the currency which they have refrained from doing for some time to take some heat out of the Australian dollar and bring it back down into their comfort zone.

The almost 5 percent rise in the Aussie dollar so far this year is starting to take it’s toll on exports as Australia becomes less competitive and many exporters are now complaining that any further gains may turn into a crisis for the sector.


Andrew Masters

Analyst

The power of leverage is the power of Forex.
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