The Australian dollar strengthened today as the rally of stocks increased appeal of the riskier assets, but the concerns about the impact of the floods on the Australian economy persist and may curb the currency’s gains.
The improving outlook for the global economy, and the US economy in particular, helped the equities to regain some strength, boosting the commodity currencies. The Standard & Poorâs 500 Index gained 0.5 percent as a result of the improving risk sentiment. “Risk sentiment is higher and equities are higher, which is helping the foreign currencies,” Nick Bennenbroek, the head of currency strategy at Wells Fargo & Co., commented about the rally.
While the world feels optimistic, Australia itself doesn’t give many reasons for optimism. Floods in Queensland continue to destroy homes, force mines to be closed, damage rail lines and harm crops. Producer prices demonstrated the negative tendencies in Australia’s economy as they registered the smallest gain in a year, rising only 0.1 percent in the fourth quarter of 2010.
AUD/USD went up from 0.9885 to 0.9985 as of 20:07 GMT today. EUR/AUD dropped from 1.3762 to 1.3655, while AUD/JPY advanced from 81.69 to 82.35.
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