What is likely to happen to the AUD?

Increase in Risk Appetite Helps Support the Australian Dollar

Following the news of the Greek bailout deal I firmly believe this may continue to support the strength of the so called ‘riskier’ assets such as the NZD, ZAR and AUD. The reason they are perceived as riskier currencies is the fact they are so heavily dependent on commodity prices and the AUD in particular heavily dependent on the mining sector and the demand from countries such as China for raw materials. With China hot on the heals of the US in becoming the worlds largest economy there is little sign of this demand for raw mat3erials from falling and I feel this is only going to lead to further strength for the AUD. There is the argument that the the Reserve Bank of Australia may intervene to artificially devalue the AUD as Australian exports are becoming less and less competitive, however I think this is unlikely. I do believe we will see an interest rate cut within the next few months but I believe the market is expecting this and it is unlikely to have a major impact on the value for the AUD. For this reason I see little movement other than continued strength in the short term and would expect a move towards 1.45 for GBP/AUD and 1.24 on EUR/AUD.

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