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You are here: Home / Australian Dollar / AUD outlook: Australian Dollar strength follows Janet Yellen comments

AUD outlook: Australian Dollar strength follows Janet Yellen comments

July 14, 2017 by Lewis Edmonds

AUD outlook: Australian Dollar strength follows Janet Yellen comments

The Australian dollar is the hot currency of late, having been steadily on the rise against a basket of currencies. The recent economic data of late has been healthy to say the least, with consumer inflation set to rise following on from increases in business and consumer confidence.

The real cherry on top was the vast amounts of positive data that was released last night from China, both import and export data showed healthy gains for the year on year figures and a 12B increase in the Trade Balance.

Australia is heavily linked to the world’s second largest economy, as a manufacturing based economy when production is high in China, Iron Ore (which is mined and exported from Australia to China) is high in demand and helps to strengthen the Australian Dollar.

Australian Dollar strengthens following Janet Yellen commentsAnother reason for the Australian Dollars recent surge comes from the frailties in the American economy.

This week Janet Yellen’s soft tone towards further interest reduced investor appetite in the American dollar and caused the USD to weaken.

What was once perceived as a risky investment, the AUD is now in the spotlight for investors. High interest rates mean that investors have pulled their funds from the Dollar and put their funds into the Australian Dollar in light of a strong economy and positive economic forecast for the up and coming months, otherwise known as carry trading.

One thing to take note of for anyone looking at selling Australian dollars to buy foreign currency is that a strong currency will mean importers from other countries paying more for their produce, and as a commodity or export based economy, this could potentially hurt the economy. The Reserve Bank of Australia may have to intervene if the Australian dollar continues to soar.

With three officials from the Reserve due to speak next week, I wouldn’t be surprised to see a little jawboning (deliberately talking down the currency) to try and slow the recent Aussie’s charge.

Filed Under: Australian Dollar Tagged With: AUDGBP, Australian interest rate, China, GBPAUD, RBA, Reserve Bank of Australia

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

About Lewis Edmonds

When he is not offering insights into the what is happening on the currency markets Lewis manages key relationships for an authorised payment institution in the UK.

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