Australian dollar may hit US$78c

Financial and commodity markets analytics

The Australian dollar is trading higher today after dovish comments yesterday by a US Federal board member who cautioned moving too quickly on rates.

Lael Brainard, a voting member of the Federal Open Market Committee appeared dovish in a speech yesterday, by noting that any imminent rate hike may derail the recovery of the jobs market which is currently an important factor in the overall economic recovery

 “Investors had hoped she would flip from a dove to a hawk like her peer Fed President Rosengren, but instead she urged continued prudence and the possibility of a rate hike halting further labour market gains,” noted BK Asset Management FX strategy managing director Kathy Lein.

After Mrs Brainard’s comments, the market has now priced in a less than 20 percent chance next week that that the Fed will lift rates which spells good news for the Aussie dollar.

Ray Attrill, from the National Australia Bank’s FX strategy team believes that the Australian dollar could make another run for US78c if the Fed agrees to leave monetary policy unchanged,

“Inaction this month should see us back above 0.77, a rate rise back down below 0.75, and probably sub 0.74. If the Fed is not going to move on rates this month, there’s a strong chance the highs will be tested before September is out.” Mr Atrill said.


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