Over the course of the first trading day of 2015, the Australian Dollar to US Dollar (AUD/USD) exchange rate plummeted by 0.9%.
The ‘Aussie’ dived against its US peer as Chinese manufacturing data added to concerns regarding the slowdown in one of the world’s largest economies and commodity prices struggled.
According to one industry expert from the National Australia Bank, the softness in the AUD/USD pairing is more to do with US Dollar strength. The NAB’s Ivan Colhoun also estimated that the Australian Dollar could fall to as low as 78 US cents before the close of the year.
Meanwhile, forex strategist Lee Hardman said of the ‘Greenback’s performance; ‘The Dollar is continuing to derive support from the relative outperformance of the US economy and building investor expectations of widening monetary policy divergence between the Fed and other major central banks.’
Next week a number of factors will dictate the movement taken by the Australian Dollar to US Dollar (AUD/USD) exchange rate.
Of course, any spikes in the commodity market will be of interest, with further slides in the price of crude oil and iron ore likely to weigh on the ‘Aussie’.
Investors will also be paying attention to the week’s main economic reports for Australia.
The AiG Manufacturing Index is believed to have fallen from 50.1 to 48.5 in December. If the measure has indeed dipped below the 50 mark separating growth from contraction, it could cause Australian Dollar declines.
The AiG Construction Index for December, due out on Wednesday, will be of similar importance.
Other figures to be aware of include Australia’s Trade Balance and New Home Sales numbers.
However, volatility in the AUD/USD exchange rate is far more likely to be occasioned by the week’s major US reports – most notably the US Non-Farm Payrolls stat.
Another month of strong employment gains would further support the case for the Federal Reserve adjusting borrowing costs in the first three months of 2015 and would drive the Australian Dollar to US Dollar exchange rate lower before the weekend.
The Australian Dollar to US Dollar (AUD/USD) exchange rate was trading in the region of 0.8102.
The US Dollar to Australian Dollar (USD/AUD) exchange rate was trading in the region of 1.2336.
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