The Australian Dollar to US Dollar (AUD/USD) exchange rate has spent much of the week trending around and beyond a 4-year low as a result of falling commodity prices, a bullish US Dollar and RBA interest rate cut speculation.
During the North American session the Australian Dollar to US Dollar (AUD/USD) exchange rate weakened as a result of the US publishing unexpectedly strong retail sales figures.
The US Dollar’s uptrend wasn’t spectacular, but the currency still gained against peers like the ‘Aussie’. Other factors also weighed on the Australian Dollar.
According to industry expert Stephen Innes; ‘The Aussie fell from the A$0.8275 New York close to its current level just below $0.8250. The AUD came under fire early in the overnight European session after Reserve Bank of Australia board member John Edwards told the Wall Street Journal Australia’s economy won’t grow strongly enough next year to prevent a further rise in unemployment. That means the RBA’s interest rates will need to remain low. Edwards clearly believes the Australian economy won’t have the strength to stand on its own in 2015 without support from the RBA and the government.’
Comments issued by Reserve Bank of Australia Governor Glenn Stevens caused extensive Australian Dollar movement overnight.
The commodity-driven currency initially plummeted against the majority of its counterparts in response to the RBA’s insinuation that the Australian Dollar will fall further next year.
However, as Stevens also downplayed expectations of a rate cut from the central bank, the Australian Dollar went on to recover lost ground.
Stevens commented; ‘I don’t want to say that there are no circumstances in which we would consider further changes in the interest rate. I think that has to remain an open question. But we’re certainly reaching levels where, for those who have interest rates as their income, the income effect on them is clearly quite something to be thought about.’
During Friday’s European session the Australian Dollar to US Dollar (AUD/USD) exchange rate gained by almost 0.4%.
The Australian Dollar to US Dollar (AUD/USD) exchange rate could pare gains in the hours ahead if the US University of Michigan Confidence Index shows the improvement in sentiment forecast by economists.
The confidence index is expected to climb from 88.8 in November to a preliminary reading of 89.5 in December. Such a strong result would lend support to the US Dollar.
Investors will also be looking ahead to next week, and the publication of the RBA meeting minutes.
The Australian Dollar to US Dollar (AUD/USD) exchange rate was trading in the region of 0.8279 during the European session.
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