Currency news - Australian dollar correction

Australian dollar correction - 27-08-08

The Australian dollar dipped to test the 0.85 level against the US dollar on Tuesday on a wider recovery for the US unit. There was a tentative recovery back towards 0.8550 in US trading as commodity prices edged higher.

The trend for higher commodity prices continued in local trading on Wednesday which provided further support to the Australian dollar. Domestically, there was a reported decline in construction activity for the second quarter, but this had a limited impact as a deterioration has already been priced in.

There will still be unease over the domestic economy which will limit currency support, although commodity prices and carry trades will tend to dominate. The Australian dollar pushed back to 0.86 against the US currency on Wednesday and the corrective recovery may continue in the near term, although rallies will quickly tend to attract selling pressure given the pressure to unwind carry trades as risk aversion persists.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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