DJ Forex Focus
The Aussie Will Rise Again. By Nicholas Hastings
The rally in the Aussie should resume soon.
With commodity prices set to extend their recent gains and with Australia's economic recovery still well ahead of the G10 pack, it would take a serious reversal in the recent increase in global risk appetite to undermine support for the Australian dollar.
Over the last few weeks, the Australian dollar has suffered a little, falling back from its recent high of $0.93 to under $0.90 at one stage.
The decline took place as global investors removed risk from the table and financial markets appeared to reassess the hawkish policies at the Reserve Bank of Australia.
This week, the central bank hiked rates for the second time, much as the market had expected. However, an unexpected decline in Australian retail sales for September and fairly dovish comments from the central bank itself meant that financial markets immediately lowered expectations of another rate hike next month.
All this took its toll on the Australian dollar.
The fact that the RBA also noted that the strength of the Aussie is contributing to monetary tightening added to the excuses for selling the currency.
However, this focus on the domestic economy shouldn't last long.
For a start, the Australian economy continues to come out from the recent global recession well ahead of its G10 competitors.
Chances are that this recovery will only get stronger.
This week, the World Bank not only raised its growth forecast for China this year to 8.4% from 7.2%, it also increased its GDP projections for East Asia as a whole to 6.7% from 5.3%.
Given its strong trading relations with these countries, Australia is set to benefit, especially as the price of commodities continues to rise with the increase in global demand.
Gold has already given a kick-start to the trend with its recent surge up to new record levels on news that India has been increasing its reserves of the precious metal
Given this, some analysts are looking for a return in the Aussie back to its recent highs or even beyond, with such a move getting additional fuel from any improvement in global risk appetite that puts high-yielders back in favor.
Early Thursday in Europe, the Aussie slipped slightly after the U.S. Federal Reserve preserved its forecast that easy monetary policy will be maintained for an "extended period" but hinted slightly at the conditions that might prompt an earlier move.
By 0730 GMT, the Australian dollar had eased back to $0.9046 from $0.9111 late on Wednesday in New York, according to EBS.
The dollar was higher elsewhere as a soft performance by most Asian equity markets and speculation ahead of Thursday's policy decisions by the European Central Bank and the Bank of England as well as Friday's non-farm payrolls led to some market squaring.
The euro fell to $1.4840 from $1.4872 and to Y134.11 from Y134.92 while the dollar declined to Y90.34 from Y90.67.
With commodity prices set to extend their recent gains and with Australia's economic recovery still well ahead of the G10 pack, it would take a serious reversal in the recent increase in global risk appetite to undermine support for the Australian dollar.
Over the last few weeks, the Australian dollar has suffered a little, falling back from its recent high of $0.93 to under $0.90 at one stage.
The decline took place as global investors removed risk from the table and financial markets appeared to reassess the hawkish policies at the Reserve Bank of Australia.
This week, the central bank hiked rates for the second time, much as the market had expected. However, an unexpected decline in Australian retail sales for September and fairly dovish comments from the central bank itself meant that financial markets immediately lowered expectations of another rate hike next month.
All this took its toll on the Australian dollar.
The fact that the RBA also noted that the strength of the Aussie is contributing to monetary tightening added to the excuses for selling the currency.
However, this focus on the domestic economy shouldn't last long.
For a start, the Australian economy continues to come out from the recent global recession well ahead of its G10 competitors.
Chances are that this recovery will only get stronger.
This week, the World Bank not only raised its growth forecast for China this year to 8.4% from 7.2%, it also increased its GDP projections for East Asia as a whole to 6.7% from 5.3%.
Given its strong trading relations with these countries, Australia is set to benefit, especially as the price of commodities continues to rise with the increase in global demand.
Gold has already given a kick-start to the trend with its recent surge up to new record levels on news that India has been increasing its reserves of the precious metal
Given this, some analysts are looking for a return in the Aussie back to its recent highs or even beyond, with such a move getting additional fuel from any improvement in global risk appetite that puts high-yielders back in favor.
Early Thursday in Europe, the Aussie slipped slightly after the U.S. Federal Reserve preserved its forecast that easy monetary policy will be maintained for an "extended period" but hinted slightly at the conditions that might prompt an earlier move.
By 0730 GMT, the Australian dollar had eased back to $0.9046 from $0.9111 late on Wednesday in New York, according to EBS.
The dollar was higher elsewhere as a soft performance by most Asian equity markets and speculation ahead of Thursday's policy decisions by the European Central Bank and the Bank of England as well as Friday's non-farm payrolls led to some market squaring.
The euro fell to $1.4840 from $1.4872 and to Y134.11 from Y134.92 while the dollar declined to Y90.34 from Y90.67.
5 November | 
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