(CN) Renewed chatter that China’s PBoC could again cut the RRR gave boost to the AUD.
(DE) AUD/USD hit an 11-week high against the USD at $1.04 as Germany’s Bundesbank said it expected to diversify more into the A$ in Q3.
(CZ) Czech Central Bank disclosed it had bought $500M-1.0B worth of in the first half of 2012 (previously Russia Central Bank had said it was increasing its Aussie dollar holdings)
(AU) RESERVE BANK OF AUSTRALIA (RBA) JUL MEETING MINUTES:
How to interpret these headlines?
With positive earnings report out of U.S. and the potential for more aggressive easing from China, following 2 benchmark interest rate cuts in just under a month, Australian Dollar is obviously benefiting from the growth measures by its largest trade partner, not mentioning the general risk demand flows… Of course, the comments out of Germany’s Bundesbank added more credibility to the Australian economy and brought a lot of flows to the AUD today, pushing it to the 1.0450 level.
Looking at the recent RBA Meeting Minutes, it is clear that RBA considers current rate to be a bit “lower than average”, and that further cuts are not warranted at this time… Arguably, this is a signal that RBA could be done with easing for the time being, and if the situation in Europe does not deteriorate further, RBA could even get back on the horse for rate hikes.
However, despite the optimism in the AUD today, here are some points to consider:
I believe this rally in the AUD will be capped around recent levels, but the focus will be on EURUSD. If EURUSD were to make a comeback above the 1.2500 level, then I would see AUDUSD make further gains… But assuming EURUSD’s next move more likely to be below the 1.2000, I think Australian Dollar may be a perfect currency to SELL on rally as traders will punish the AUD on any negative news that hit the wire.
Why Is The Australian Dollar (AUD) So Strong?
July 19, 2012 by 2 Comments