Tag Archives: carry trade
The AUD has made further gains during Thursdays trading against both GBP and the EUR, although it has lost some ground against the USD. The Australian Dollar has weathered the EU financial crisis better than other currencies and has in fact continued to strengthen on the whole, during this turbulent time for the global economy.
It has as been discussed in previous blogs that this strength has been fuelled by China’s demand for Australia’s raw materials and its reliance therefore on Australias affluent mining sector and with China’s economy now the second largest in the world, this demand has only increased. With high interest rates, it is also very attractive for investors looking to carry trade (the process of purchasing currency in a low interest country, Japan for example and then moving it to one with a higher rate of interest like Australia, to benefit from this disparity).
The AUD has reached an all time high against the EUR, touching on 1.17 and is currently pushing the 1.50 barrier against GBP. How much further it can go will depend on how events in Europe unfold and whether China’s demand and growth prospects over the coming months remian high, which i think is highly likely.
Personally I feel the AUD could go even further against the EUR, whilst investor confidence remains at an all time low and it wouldn’t surprise me if we saw the 1.50 barrier broken again against Sterling over the coming weeks.
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