Historically the performance of the Australian dollar has been linked to confidence in the global economy. When investors were confident they would buy the Aussie as the Australian economy performs well when there is strong demand for its natural resources. When the global economy is doing well countries like China with high exports will be buying up more Australian raw materials. Consequently when there is a dip in global confidence, there would often be a sell-off of Australian dollars.
‘It is perfectly foreseeable that we will break through this particularly with the pound so weak’
Lately however this correlation has been distorted as investors overlook the more historic rules amidst more global concerns on debt. Australia is being viewed very favourably by investors and is very close to touching an all-time high against sterling. It is perfectly foreseeable that we will break through this particularly with the pound so weak. And it is not just investors buying up the Aussie, I heard that the Swiss National Bank have more than doubled their holdings of Australian Dollars. This just shows the weight of support behind the currency and makes it highly unlikely we will return to the more historic rates anytime soon, if ever.
The Aussie has continually defied expectations in the recent years and I see no reason why it will not continue to do so. If you are considering any AUD transfers in the future I can keep you updated on how this pans out so please get in touch if you would like any further information.
What about further Interest Rate cuts? Interest rates affect a currency’s strength the same way a higher or lower interest rate attracts savers to a bank account. The higher the rate, the higher the investment and the stronger that currency becomes. It isn’t really in the interest of any country that exports heavily (like Australia does) as it makes their goods and services more expensive. However Australias main trading partner China will continue to buy from Australia because it needs their goods.
We have seen the central bank cut rates by 1.25% and the rate is still touching an all time high against sterling. The usual effect of rate cuts weakening a currency is not curently true with the Aussie. With speculation of further rate cuts down the line we could easily see the Aussie weaken a touch but the overriding interest in the currency will for me remain and hence keep the currency strong.
The Aussie has moved over 15 cents between the high and the low this year which would equate to huge differences in the amount of currency you receive depending on when you transfer. I hope you find this information useful and would be happy to speak with you to discuss your particualr requirements. I work as a specialist currency broker for the UK’s largest independent currency brokerage and we can assist clients all over the world. Please email me Jonathan on [email protected] or call 01494 787 478.