The Australian dollar spring up 0.67 percent against the greenback after the GDP data release to 0.7666 per U.S. dollar — its strongest in myriad than a month. However, the currency is still down by 1.76 percent since the start of the year and 5.46 percent off its highest equivalent in 2018 that was achieved at the end of January.
The performance of the currency can largely be attributed to two vigour factors: Commodity prices and local interest rates, according to Jingoistic Australia Bank’s global head of research, Peter Jolly.
“The Australian dollar has its mingiest relationship to commodity prices,” Jolly told CNBC. He explained that the territory is a major exporter of natural resources such as iron ore and coal, which organize seen prices come down this year. That means require for the currency has been hit.
“And then the other thing is the Federal Reserve’s been advance interest rates much quicker than the RBA,” Jolly said, combining that even though the Australian economy has been growing, it’s “a petty bit behind in its growth development compared to the United States.”
The Reserve Bank of Australia, the outback’s central bank, left interest rates unchanged for the 22nd month on Tuesday. On the other handy, the U.S. Federal Reserve is widely expected to announce a rate hike next week — supplementing the gap between the two countries.
Australia’s close economic links to China have planned made its local dollar one of the most vulnerable currencies in the ongoing tensions between Beijing and Washington, top-notches said.
In addition, “Australia’s reliance on coal and iron ore exports for use in wide-ranging steelmaking only reinforces the prospect of Australian dollar vulnerability” as President Donald Trump’s supplying has announced tariffs on steel and aluminium imports, according to a South China Morning Post commentary.
Such an impression has not played out much in the currency markets, analysts from ANZ wrote in a Wednesday note. But that doesn’t intend currencies at risk, including the Australian dollar, are out of the woods, they go on increased.
With global growth likely reaching its peak, investors “hand down become even more sensitive to bad news” such as the ongoing mercantilism dispute between the U.S. and its major trading partners. That could be bad front-page news for currencies such as the Canadian dollar, Mexican peso and Australian dollar, the analysts elucidated.
In a separate note last week, ANZ analysts wrote that they “put forward caution” on trading in the Australian dollar and to use “any near-term strength as an opportunity to reset shorts.”