AFTER news emerged that the Syrian government is allegedly using chemical weapons in the ongoing civil war there, the expectation is that the US government will very soon take some form of military action against the Assad regime in response. This is expected to put downward pressure on the Australian dollar. According to Easy Forex currency dealer Milica Nikolic: “The Australian dollar move down is representative of risk aversion.” He added that markets had been left “a little bit on edge”.
The Australian dollar opened the week stronger after The University of Michigan consumer sentiment index showed that consumer confidence in the US fell from a six year high in August. There was however a fall in commodity prices overnight and this, along with the Reserve Bank of Australia hinting at further rate cuts, resulted in a weaker Australian dollar.
The Aussie dollar remains sensitive to the United States Federal Reserve economic stimulus program of quantitative easing. Any indication that the Fed will taper this program continues to put downward pressure on the Australian dollar. This was the case when the minutes of the Fed’s July meeting, released last Thursday, showed that the stimulus program might be ended if the US economy improves. Positive Chinese manufacturing data released at the end of the week did provide some respite for the Australian dollar along with other emerging market currencies.
Composed by Jaco Herselman of 1st Contact Money Transfers
Exchange rates at 09:00 GMT, 27 August 2013.
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