The Australian Dollar finished the week firmly on the front foot after a very strong week for the southern hemisphere currencies. We have seen the AUD strengthen by over 2 cents against the pound, 1 cent against the USD and over 4 cents against the Euro in around 10 days.
Although the levels for selling the AUD are not as good as where trades were say 6-9 months ago, I think many of us realise it is unlikely we will see the AUD strengthen back to 1.60 against the GBP parity with the USD and 1.30 against the Euro.
The turn around in fortunes for the Aussie Dollar is significant if you are looking at buying any of the western currencies named above. If you have been waiting patiently say to buy Euros then this is now the best rate in over a month.
Why the upturn in fortunes though? Well I believe it lies with China. As they recently cut interest rates it is causing a move back into the AUD by investors.
As Chinese interest rates were so attractive policy makers are cleaning that out and it seems that money is going back to other places and the AUD will be the winner.
You should however be cautious whether you are buying or selling the AUD. The RBA have stated it is unlikely that we will see further rate cuts in Australia which should theoretically continue to strengthen the Dollar but on the other hand the RBA want the AUD to remain weaker to entice overseas investment. The phrase stuck between a rock and hard place springs to mind when they look at future policy.
If I was now looking at selling the AUD I still think that there is more chance we will see the AUD weaken further during 2014 but maybe Chinese policy will play a big part in how the currency performs.
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