After posting a weekly gain of 1.3 per cent against the US Dollar following several positive pieces of Australian data the ‘Aussie’ declined during local trade after investors flocked to less-risky assets in the wake of concerning developments in the Eurozone.
The Australian Dollar exchange rate was trading in the region of 1.0375 against the US Dollar as of 11:07 am GMT
Last week the ‘Aussie’ was boosted by an unexpected employment surge, an impressive result which further diminished the odds of the Reserve Bank of Australia issuing a rate cut in the months ahead.
Although movement in the Australian Dollar was limited by expectations surrounding tomorrow’s release of minutes from the RBA’s most recent policy meeting, the ‘Aussie’s advance came to an end after news of an enforced levy on Cypriot bank deposits triggered fears of a resurgence of Eurozone woes.
The South Pacific currency shed 1.1 per cent against the Japanese Yen and 0.5 per cent against the US Dollar as both safe-haven assets strengthened.
In the wake of the volatility inspired by the news from Cyprus one economist with the Commonwealth Bank of Australia remarked: ‘Aussie, Kiwi opened this week’s trade quite a bit lower. Whilst there are no direct linkages between Australia, New Zealand and Cyprus, the currencies are reacting to changes in market sentiment. There could be some fears in the marker that if another sovereign required a bailout, they may tax the deposits of that particular country as well.’
The New Zealand Dollar also declined after it became known that the Cypriot President acceded to the request of Eurozone finance ministers to raise nearly six billion Euros through an unprecedented levy on the nation’s bank deposits. The ‘Kiwi’ posted notable declines against safe-haven rivals the US Dollar and Japanese Yen.
Whist Europe will be a main concern in the days ahead investors will also be focusing on the RBA’s policy meeting minutes.
Meanwhile, New Zealand’s GDP and retail sales figures are also likely to inspire movement in the ‘Kiwi’.
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