The Australian dollar has lost more than 70 points from yesterday’s high of .8040 cents.
“That’s a big pullback for the Aussie after RBA Governor Lowe highlighted the handbrake for the Aussie dollar – if it rallies hard from here – it would pose a threat to growth,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
According to McKenna, Governor Lowe managed the balance between communicating the current situation and outlook versus the potential disruption to that outlook if the Aussie rally continues.
“My take on forex markets was that the positives of the outlook slightly outweighed the possible negatives of a higher Aussie,”
“If we look closer, it is the global backdrop as well as the strength of the domestic economy, which is actually driving the Aussie dollar,” McKenna said.
He also pointed out that the weak US dollar is another factor to the Aussie’s strength.
“And a weak US dollar is something which the RBA cannot counterbalance effectively in an enduring manner,” he added.
McKenna said “In other words, a higher Aussie dollar tightens financial conditions in the economy and acts as a de facto rate hike. So rates in Australia won’t be going up anytime soon.”
Back in 2007, AxiTrader was founded on a simple idea: to be the broker we’d want to trade with. We’ve since grown to become one of Australia’s largest and leading Forex brokers. Investing in over-the-counter derivatives carries significant risks and is not suitable for all investors. You could lose substantially more than your initial investment.
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