Australian Dollar Rises to 2-year High

An Australian one hundred dollarAn Australian one-hundred dollar banknote. Photographer: Brent Lewin/Bloomberg
  • Australian Dollar Rises to 2-year High

The Australian dollar jumped to a two-year high against the US dollar last week after US economic data showed it’s unlikely the Fed would raise interest rate for the third time this year.

The Aussie dollar rose 1.3 percent to US78.34¢ on Friday, the highest since May 2015. Bringing its total gain against the greenback this year to 8.6 percent.

According to the US Commerce Department, retail sales declined by 0.2 percent in June following a 0.1 percent drop in May. While consumer prices remain steady without growing signs ahead of balance sheet normalization and widely expected third rate hike.

“The figures from the US has been relatively uninspiring, particularly on the inflation side and the numbers today will have done nothing to give policy makers any more confidence,” Oanda’s Craig Erlam said.

“While CPI may not be the Fed’s preferred measure of inflation, it is released three weeks before the core PCE price index and therefore offers plenty of value,” Mr Erlam said.

Also, Goldman Sach has lowered the possibility of the Federal Reserve raising rates for a third time this year to 60 percent from the 70 percent.

“We viewed the details of the CPI report as modestly encouraging relative to our previous expectations”, said Goldman Sach. However, “we doubt the FOMC (the Fed’s policy making committee) will view this fourth consecutive miss in the same light.”

However, the chief economist of Westpac Bill Evans said the Reserve Bank of Australia is likely to hold rates at current level due to slow economic growth amid a drop in global commodity prices.

The economist expected the RBA to leave rates at the current level through 2018 and the Australian dollar adjust to US65¢ against the US dollar by the end of 2018.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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