The Australian dollar is trading sharply lower today as key employment data out of the US late Friday sent the US dollar soaring against all major currencies Including the Aussie.
At 6.50pm (AEDT) the local currency is trading at US 82.61 cents down from US 83.11 cents on Friday
The Latest non-farm payrolls data from the US came in at a staggering 321.000 against analysts’ expectations of 230,000 clearly showing that the US economy is in recovery mode and providing further evidence that the US Federal reserve may need to make a move on Interest rates sooner rather than later.
“There is now a consensus amongst analysts that the Australian central bank will move to reduce rates while at the same time the US Fed will seek to Increase rates which will close the gap on the Interest rate difference” noted analysts from Fibogroup forex brokers.
“We have rates in the US sitting at 0.25% while in Australia the rate is at 2.5% and as the difference begins to narrow, the Aussie dollar will lose some of its appeal and especially in regards to the carry trade which has helped underpin the Australian dollar for a number of years” they said.
Just how far the Australian dollar will now fall is anybody’s guess but some are very bearish on the currency including State Street Global Advisor's head of investment solutions Mark Willis who noted,
"At the moment it’s probably fair to say many chief investment officers think of US80 cents as being a neutral level,"
"On our valuation metrics we have a long-term fair value at around US70 cents. It's moving back towards that level and a lot of funds have been anticipating the slowdown in the commodities cycle and that was communicated in a way that they wanted their hedges lightened," he said.
Market Overview by
FiboGroup
