Local: Fri
Sydney: Fri
Select Destination
Location Time Temp
Sydney Fri20°
Melbourne Fri17°
Brisbane Fri21°
Perth Fri21°
Adelaide Fri
Hobart Fri15°
Canberra Fri18°
Darwin Fri27°

news

Get our help FREE advice or find service providers with our bookJobs Now

Reasons why investors are bullish about the Australian Dollar

02 March 2017 by csf-admin

The Australian dollar (AUD) has been steadily rising over the past 6 months and it's not just the US Dollar (USD) it’s performing well against.

The AUD is now being bought for over 0.72 Euros, which is the highest price it has enjoyed since 2015. It is also going strong against the Canadian dollar, British Pound, and Japanese Yen.

Currently, the AUD is selling against the USD for 0.78 cents.

Australia has high interest rates right now, which is the biggest reason why the currency is going from strength-to-strength. When interest rates are low, investments are low, and the U.S.’ most recent aggressive bond buying a few years ago is a testament to that. The Reserve Bank of Australia (RBA) seems to have no plans on cutting interest rates, while Europe, Japan, and Canada aren’t looking to raise interest rates either. As such, the AUD will most likely be the most attractive for potential investors for some time.

Another reason that supports the AUD’s rise is the sharp increase of prices in commodities over the past year. In addition, the turnaround in the international trade balance from sizable deficits is also aiding the AUD’s strength.

Australia’s trade exports are governed by bulk commodities. When the price of commodities increase, companies that extract natural resources enjoy a huge spike in profits. As such, as foreign currency export receipts rise, these firms convert a huge portion of their revenues to AUD, which increases demand and pushes the currency higher.

The AUD is currently the fifth most-traded currency in the world. It was initially pegged to the Pound Sterling, but then was later on pegged to the USD back in 1967. Financial Website FXCM says that the AUD has an 8.6% share in transactions that happen around the world on a daily basis.

Time horizons that concern investments and trading of financial instruments tend to give more stability when they increase. Contrary to intraday volatility, where price fluctuations are gauged using minutes or seconds, intermediate term volatility is measured in days, weeks, and even months. The key force of intermediate term volatility for the AUD are fundamental in nature, and have usually something to do with the key players of the Australian economy.

The rise of the AUD means that Australia’s overall economy has seen a welcome boost. A high currency improves conditions, and will most likely initiate a surge in tax revenues to the government. The budget for infrastructure and other projects will also be high. The stability of the AUD, as well as the confidence of investors in the currency, also dispels the news about Australia getting a credit downgrade. Previously news was circulating that Australia’s triple-A credit rating was under threat due to low inflation, high unemployment, and really low wages, but the AUD’s current strength signifies that the country’s credit rating will most likely remain the same.



We use cookies on Thinking Australia

This website uses cookies to ensure you get the best experience on our website. Please confirm permission to use cookies.
Cookie Policy Privacy policy