Why the Australian Dollar Took a Hit Overnight

At close of business yesterday, the Aussie dollar was trading at around US$0.7155. But early this morning, it dipped to around $0.706. As at 10:00am, it’s at US$0.708.

Copper and zinc 23 09 2015
Source: Trading View
[Click to enlarge]

Wondering what happened? It was probably something to do with falling commodity prices. Overnight, iron ore fell by nearly 2%. It’s now at US$56.54. Part of that would be due to a report from the Asian Development Bank. The Bank published an update to its Asia Development Outlook 2015.

Specifically, they’ve downgraded the growth forecast from 7.2% to 6.8% for 2015. And from 7.0% to 6.7% in 2016.

ABD chief economist Shang-Jin Wei said that ‘In addition to less favourable demographics and higher wage costs, the PRC’s adjustment to a new growth model that is based more on innovation, consumption, and services will bring with it more moderate growth.’ He moderated that by saying that if pro-market reforms went ahead, China would recover. But the damage was already done.

Copper and zinc also took hits. Again, that’s China’s fault. Some analysts blamed speculation on Chinese manufacturing sector data, due out later today. The expectation is that the stats will be negative.

Copper and zinc 23 09 2015
Source: Investing.com
[Click to enlarge]

The US dollar also strengthened. Particularly against the Euro. This time, not China’s fault — rather, the Fed. Many traders still expect the Fed to raise rates soon. They’re basing that on semi-unofficial commentary released since the decision to hold.

This movement pushed the Australian dollar down in comparison.

USD EUR AUD 23 09 2015
Source: Trading View
[Click to enlarge]

If the weak Aussie dollar is making you start to think about searching for growth offshore, you’re not alone. Money Morning emerging markets analyst Ken Wangdong has written a free report to help you in that search. It’s titled ‘Three Emerging Markets Primed for Explosive Growth in 2015’. In this report, Ken reveals the three markets that are most worthy of your attention. Including one wildcard that may surprise you. Plus, Ken names one of the emerging markets you should avoid at all costs. Find out how to download your free copy here.

Eva Mellors,
Contributor, Money Morning

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