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Aussie dollar goes down after a three-month strong run

After a three-month high, the Australian dollar made a slight retreat from its strong run after the currency market made a reassessment of global economic prospects - according to report in news.com.au.

The highest trade of the local currency was 106.86 which happened early Friday morning, on January 27. The Australian dollar went up because of the equity markets’ strong performance. This was the highest since October 31. By 17.00 (AEDT) the Aussie dollar was trading 106.11 US cents which was lower compared to Thursday afternoon’s 106.36 cents.

Joseph Capurso, Commonwealth Bank’s currency strategist stated that depending on upcoming US data, the Australian dollar is likely to wind down even further.
Capurso said, "It's hard to see the Aussie dollar moving much in the next couple of hours but there are a couple of big events happening tonight, including the US GDP (global domestic product)."

"That has, I think, the risk of disappointing the market, and that would probably push the Aussie down a bit because it would again raise questions about the state of the global economy.

"The Aussie dollar is broadly seen as a barometer of the global economy, so we could see a drift downwards similar to what we've seen today."

The US Federal Reserve already gave hints of its plan to keep rates low until the year 2014. The Reserve Bank of Australia is also set to make a decision regarding rates by early February.

Capurso believes the RBA’s rate decision for a cut could have effects on the direction of where the local currency is heading even if the market would probably not make much of a move in response to the Reserve Bank’s decisions.

"The market's got about an 80 per cent chance of a rate cut, so if the (central) bank does deliver, it still shouldn't move the Aussie much."

"But if they start to sound more concerned about our domestic economy or about (banking industry) funding costs in their statement, then that could soften the currency on the day at least," added Capurso.




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