The Australian Dollar lost some strength against the US Dollar and other peers on Friday as demand for riskier assets took a tumble and a report suggested that the ‘Aussie’ is set to decline on technical indicators.
Yesterday the ‘Aussie’s’ 14-day relative strength index came in for a third day above the 70 level which indicates that a currency has been overbought. The last time that occurred, the currency tumbled by 11% to reach its lowest level in more than three years. Despite that, most economists expect the currency to remain in the 93 cents range.
“The recent move in the AUD was not fundamentally justified and was driven mainly by increased optimism about the local economy. The market appears to have ignored increased tensions in eastern Ukraine and concerns about a slowdown in China’s property market.
‘Any further strength in the AUD will be driven by speculative flows, or by reverse recycling from regional central banks, and while this can persists, their foundations are tenuous,” said a currency strategist based in Australia.
The ‘Aussie’ has also been affected by a decline in risk appetite due to a sharp slide on Wall Street. Tech stocks plunged as market sentiment in the USA deteriorated due to concerns over weak financial results in a number of US companies and a cool down in investor sentiment. Asian markets also saw a sharp decline in tech stocks.
“There was a bit of a meltdown in US stocks, led by the tech sector, and that spilled over into Asian stocks this morning, which sort of furthered the risk-off mentality. The Australian Dollar has just been caught amid this quite rapid deterioration,” said Ray Attrill from National Australia Bank.
Australian Dollar (AUD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,
,US Dollar,0.9382 ,
Australian Dollar,, Pound Sterling,0.5592 ,
Australian Dollar,,Euro,0.6751 ,
Australian Dollar,,New Zealand Dollar,1.0820 ,
[/table]
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