The Australian dollar has crashed through the US 80.00c mark as strong Iron ore prices and an expectation that the US Federal Reserve will hold off a little longer on raising interest rates provided a boost to the local currency.
Commonwealth Bank of Australia chief currency and rates strategist Richard Grace said the rally in the Australian dollar could last another 6 weeks if the Fed comes out with a dovish statement today and the RBA holds off on cutting rates next week. He also noted that the rebound in the price of iron ore might also help the cause.
"It is an important week and that will be a big factor in determining whether the Australian dollar can carry on with this lift," he said.
"I suspect that the Australian dollar can carry on because it's not just driven by the US dollar but supply driven cuts in commodity prices. The lift we've had in iron ore and oil prices and some of the other commodities as well is helpful." He added.
ANZ's senior currency strategist Daniel Been noted that the Aussie dollar is in favour for the time being but he doesn’t expect a rally to continue for any prolonged period of time.
"You'll always have these periods when volatility dips ... I certainly don't think this is the beginning of an extended rally in the Aussie dollar." He said.
Also helping the Aussie’s cause was another round of weak data out of the US as the consumer confidence index came in 95.2 well below analyst’s expectation of 102.2.
That’s a big miss and could be the “the proverbial ‘straw that broke the US dollar bull’s back'” Matt Weller, senior technical analyst at Forex.com told Reuters. “While this figure (consumer confidence) was a shock for dollar bulls, it merely extends the persistent trend of disappointing U.S. data,” he said.
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