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Australian Dollar enjoys yield hunt

25 August 2016 by News Desk

Australian Dollar could face effects of budget measures to curb spending.

Australian DollarAustralian Dollar watchers have heard Australian Treasurer Scott Morrison call for tougher measures citing the fact that credit ratings agencies have all expressed a desire to see these lest Australia’s credit rating be cut, according to currency specialists TorFX

Morrison gave a strong defence against growing protectionist sentiment in parliament, citing the strong economic benefits of foreign investment for the Australian economy.

It’s not surprising the Australian Dollar has responded positively to this; Australia’s comparatively high interest rates and strong economy have made it a safe-haven for foreign investors.

New Zealand Dollar – There may be good signs for New Zealand’s dairy market, but a sell-off after yesterday’s rally is keeping the New Zealand Dollar firmly on the decline today.

Traders are profiting after yesterday’s ratings hold by Standard & Poor’s for the New Zealand banking sector, which saw the ‘Kiwi’ trending bullishly.

Today, Fonterra – the world’s biggest diary exporter – raised its milk price forecast for the 2016-2017 season to NZ$4.75 per kilogramme of milk solids; an increase of 50 cents.

New Zealand bond yields have risen, as have domestic stocks, as optimistic traders switch from safe-haven treasuries to more risky shares thanks to renewed confidence in the New Zealand economy.

Australian Dollar enjoys yield hunt

Pound Sterling – A combination of profit-taking and speculation over the future of the NHS has weakened the Pound after yesterday’s strong rally.

A leading think tank has warned that without the support of its 57,000 EU workers, the NHS could collapse. Many are worried about the impact stronger border controls could have upon the NHS post-Brexit.

As a result the latest report by the Institute of Public Policy Research has somewhat lessened market jubilance over yesterday’s mortgage figures and kept the spectre of Brexit-related damage to the UK hanging over the markets.

Euro – Poor German business confidence data has failed to undermine the Euro today, with the common currency making small advances against most of its peers.

The IFO Business Climate, Current Assessment and Expectations surveys all registered a notable drop in sentiment. A marginal rise had been forecast for all three measures. However, the Euro has managed to remain firm due to weakness in the US Dollar and the inverse relationship between the two.

US Dollar – With the combined headwinds from approaching key US economic data and the start of the Federal Reserve’s Jackson Hole Symposium, the US Dollar has started the session on the downtrend.

Preliminary durable goods orders are expected to post a strong recovery after last month’s large slump, but the drop recorded previously was against forecasts of a slowdown in decline, so there are no guarantees the figure will improve.

Regardless of the data, attention is likely to remain fixed on tomorrow’s speech by Fed Chair Janet Yellen. The US Dollar could be in for a lacklustre day of trading.

Canadian Dollar – A rudderless Canadian Dollar is responding to weakness or strength in other currencies today, with the ‘Loonie’ registering a mixed performance across the board.

The Royal Bank of Canada has pleasantly surprised analysts after raising shareholder dividends by two cents; a move which follows the announcement of a 17% increase in profits for the third quarter of the fiscal year.

Furthermore, the RBC has set aside less capital than previously to deal with bad loans, pointing to a more upbeat outlook in the ability of its customers to repay their debts thanks to improved economic circumstances.

Learn more about the Australian Dollar – Contact TorFX: Get A Quote

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