The Australian Dollar has had a fairly choppy week so far this week, generally losing ground against most major currencies due to comments from the Reserve Bank of Australia that indicated that any interest rate hikes may be quite far away, and also due to global uncertainty in the stock market, seeing the Dow Jones and other indexes around the world drop considerably over the week.
The issue with the Australian Dollar is that it is perceived as a riskier currency, therefore when you tend to see a volatile global market, and uncertainty politically or with economic data around the world you tend to see the Australian Dollar weaken, as investors will shy away from riskier currencies and head to safer havens, such as the U.S Dollar and the Swiss Franc.
As I indicated earlier in the week I do feel that the Australian Dollar may have a tough period coming up, with interest rates due to be raised by various central banks around the world this may lead to a further flow out of the Australian Dollar and into more attractive currencies with better returns on investment.
The RBA also released a monetary policy statement last night, and although economic data is still fairly good there are concerns around slowing wage growth and inflation rising too.
Poor wage growth and high inflation is a big issue for an economy, as it means the cost of goods and services is going up yet the amount the general consumer has to spend is not rising in line with it, another potential issue for the Australian Dollar going forward.
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