With 58.8% of Australia’s exports last year accounted for by oil, iron ore, coal and gold, changes in prices of these raw materials can significantly affect the strength of the Australian Economy and thus AUD exchange rates. As a result, gaining a status as a commodity currency across the FX market alongside CAD. These Commodity currencies can act as safe-haven in times of economic uncertainty due to their wealth of natural resources.
Furthermore, with RBA - Royal Bank of Australia - consistently holding some of the highest interest rates in the developed world, currently at 1.5% compared to that of more traditional safe-haven currencies such as the USD or GBP with interest rates of 0.5% and 0.25% respectively. Australia has seen global inflows increase dramatically since June as investors flock to take advantage of these unusually high interest rates compared to other major developed economies. As a result, posting gains against both major currencies of 10% and 21% respectively in the 5-month period between June and November, however can they continue to hold?
However, with America’s economy starting to show signs of improvement and the very real possibility of the FED raising interest rates on December 14th are we seeing the end of the strength for the AUD? If you have a AUD selling requirement it may worth contacting your broker here at Currencies.co.uk on 01494 725353 to consider securing these highs now though the use of a forward contract for a small deposit before any possible FED interest rate hikes are confirmed.
The OPEC deal agreed at Wednesday’s meeting in Vienna will see production of oil cut by 1.2m barrels a day. As a result of this agreement Brent crude posted 14% gains in a two day period, up to $54 per barrel on Friday. Further high prices for iron ore – 25% of Australian exports -, up 100% since the start of the year to almost $80 per tonne could lend support for the Australian Dollar to hold its current value in the region of 1.70 against the Pound and 1.34 against the US Dollar with the possibility for further strengthening due to increased speculation of higher demand under a Donald Trump government.
Tuesday 6th December sees the RBA interest rate decision and subsequent statement released at 03:30. While no change is expected until mid-2017 it is important to stay in contact with your broker here at currencies.co.uk if you have an Australian Dollar requirement.
Call our trading floor on 01494 725 353 or email me here if you do not currently hold an account with us, and I will be more than happy to provide you with assistance in getting registered.
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