Australian Dollar Will Keep On Climbing. By Nicholas Hastings
As the Australian economy continues to accelerate ahead of the global recovery, so should the Australian dollar.
Last week illustrated just why the Aussie should soon revisit its 2008 high at $0.9850.
See the Australian dollar's recent advance:
Click Image to Enlarge
While the Reserve Bank of Australia was increasing its interest rates for the fourth time since the end of the global credit crunch, other major central banks appeared to be stepping back from any such considerations.
With the sustainability of the U.S. recovery looking highly questionable, given the soft performance of the country's housing market, speculation over an early rate rise by the Federal Reserve has fallen back steadily.
In Europe, the European Central Bank indicated at its latest policy meeting Thursday that although it does plan to end its unconventional policy, it will hang on to ultra-easy monetary conditions for a little while longer while the uncertainty over Greece and other sovereign debtors persists.
Reports from Japan suggest that it might actually have to resort to even further monetary easing given the continued threat that deflation is posing to its economic recovery.
For Australia, probably an even more important monetary development came from China, when Premier Wen Jiabao appeared to dismiss recent talk that the Peoples' Bank of China will need to slow the economy down through either further monetary tightening or an appreciation in the yuan.
In his annual address to the National Peoples' Congress in Beijing, Wen confirmed his intention to maintain a loose monetary policy. This will not only ensure that Australia's largest export market continues to expand but that demand for key commodities also continues to rise.
Trade data last week, showing a narrowing in the trade deficit to a seven-month low of A$1.2 billion in January from A$2.3 billion in December, reflected a 7% rise in metal ore and mineral exports at the same time that iron ore and coal prices continued to rise.
Simon Derrick, a senior currency strategist with Bank of New York Mellon Corp. in London, said there was an added twist that will help to keep commodity prices--and so the Australian dollar--on the rise.
"We see a direct relationship between a pick in demand for hard commodities and rising worries (whether justified or not) over sovereign debt risk," he said, suggesting that Greece's debt problems could continue to benefit Australia.
Early Monday the Australian dollar is in fine shape, printing a fresh seven week high of $0.9125 thanks in part to an improvement in sentiment after Friday's better than expected U.S. non-farm payroll numbers and a positive start to the week for global equity markets.
The U.S. dollar is struggling pretty much across the board Monday with the euro garnering support from French President Nicholas Sarkozy's weekend comments that the euro zone is ready to rescue Greece should the government struggle to fund its deficit. Sterling took some relief from the latest election polls which gave the Conservatives a bigger lead over Labour and reduced the risks of a hung Parliament.
Around 0750 GMT the euro is worth $1.3700, up from $1.3620 in late U.S. trade Friday while the pound fetches $1.5190, up from $1.5152. The dollar is up at Y90.43 from Y90.33.
The Australian dollar is up at $0.9126 from $0.9072.
Last week illustrated just why the Aussie should soon revisit its 2008 high at $0.9850.
See the Australian dollar's recent advance:
Click Image to Enlarge
While the Reserve Bank of Australia was increasing its interest rates for the fourth time since the end of the global credit crunch, other major central banks appeared to be stepping back from any such considerations.
With the sustainability of the U.S. recovery looking highly questionable, given the soft performance of the country's housing market, speculation over an early rate rise by the Federal Reserve has fallen back steadily.
In Europe, the European Central Bank indicated at its latest policy meeting Thursday that although it does plan to end its unconventional policy, it will hang on to ultra-easy monetary conditions for a little while longer while the uncertainty over Greece and other sovereign debtors persists.
Reports from Japan suggest that it might actually have to resort to even further monetary easing given the continued threat that deflation is posing to its economic recovery.
For Australia, probably an even more important monetary development came from China, when Premier Wen Jiabao appeared to dismiss recent talk that the Peoples' Bank of China will need to slow the economy down through either further monetary tightening or an appreciation in the yuan.
In his annual address to the National Peoples' Congress in Beijing, Wen confirmed his intention to maintain a loose monetary policy. This will not only ensure that Australia's largest export market continues to expand but that demand for key commodities also continues to rise.
Trade data last week, showing a narrowing in the trade deficit to a seven-month low of A$1.2 billion in January from A$2.3 billion in December, reflected a 7% rise in metal ore and mineral exports at the same time that iron ore and coal prices continued to rise.
Simon Derrick, a senior currency strategist with Bank of New York Mellon Corp. in London, said there was an added twist that will help to keep commodity prices--and so the Australian dollar--on the rise.
"We see a direct relationship between a pick in demand for hard commodities and rising worries (whether justified or not) over sovereign debt risk," he said, suggesting that Greece's debt problems could continue to benefit Australia.
Early Monday the Australian dollar is in fine shape, printing a fresh seven week high of $0.9125 thanks in part to an improvement in sentiment after Friday's better than expected U.S. non-farm payroll numbers and a positive start to the week for global equity markets.
The U.S. dollar is struggling pretty much across the board Monday with the euro garnering support from French President Nicholas Sarkozy's weekend comments that the euro zone is ready to rescue Greece should the government struggle to fund its deficit. Sterling took some relief from the latest election polls which gave the Conservatives a bigger lead over Labour and reduced the risks of a hung Parliament.
Around 0750 GMT the euro is worth $1.3700, up from $1.3620 in late U.S. trade Friday while the pound fetches $1.5190, up from $1.5152. The dollar is up at Y90.43 from Y90.33.
The Australian dollar is up at $0.9126 from $0.9072.
- 8 March |
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