TIM WATERER, CMC Markets foreign dealer said that it was a fairly positive start for the Australian dollar, with equity markets in Asia showing some reliance, and not following the negative lead from Wall Street on Friday.
“There is a situation in the market at the moment that perhaps the recent sell-off is not justified by the fundamentals. That would bring some of the bargain hunters into play.’’
The Aussie also advanced against the yen, despite speculation that the Federal Reserve Bank is considering further steps to improve the US economy, supporting demand for riskier assets.
BlueScope Steel, one of Australia’s largest steelmakers has shut down half of its steel-making capacity, ceased exports, and scrapped as many as 1000 jobs. This, along with the high Australian dollar, has put a lot of pressure on trade-exposed industries
The announcement by BlueScope came one week after OneSteel, one of its competitors announced that 400 job positions were to be axed, with more to follow in coming weeks. Both steel makers are blaming the strong dollar, as well as weak demand for the cuts. HSBC’s chief economist, Paul Bloxham said that this is the nature of structural shift that is happening in the Australian economy at the moment.
‘‘The high level of commodity prices is boosting the exchange rate lately meaning we are getting the structural shift. With commodity prices at the high levels they are, it motivates labor and capital to shift towards the mining industry.’’
Exchange Rates as of 09:58, 22 August 2011
Composed by Francois de Wet of 1st Contact
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