Australian dollar may have run it's course
The Australian dollar was once again sharply rejected at the US80c mark in today’s trading session as senators in the US voted to end a government shutdown and Australia’s biggest export tumbled over 4 percent.
In a last minute deal, senators from both sides of the US congress joined forces and agreed to fund the government for the next 3 weeks which provided a much needed boost to the greenback at the expense of currencies such as the Australian dollar.
In what is now the 3rd straight day of resistance, the Aussie dollar has failed to hold above the psychological US80c mark with solid local data and good numbers out of China failing to support it
“Despite a healthy Australian jobs report, positive Chinese GDP surprise and soft US dollar environment – AUD/USD has failed to make much headway above the 0.80 level,” says Viraj Patel, a strategist at ING Group.
At around US80c, the level of the Australian dollar is also bound to raise eyebrows for some board members from the Reserve Bank of Australia who remember all too well what happened the last time the Australian economy was in this situation.
When the Aussie dollar previously traded at such levels, industries such as the export sector began to suffer as Australian exports became more expensive and uncompetitive on the world stage and the RBA had to step in to bring the currency lower.
Some analysts predict that the central bank may once again intervene, and with this scenario the Australian dollar is likely to be sold off.
“We’re not overly surprised given that investors are likely to view this as the RBA’s threshold for increased currency jawboning – especially while local inflation remains benign.” Mr Patel added.
Author
Andrew Masters
FIBO Group
