Australian Dollar Appreciates Against the Majors

on Jul 23, 2012
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The Australian dollar has managed to recover some of his earlier losses as the boost in gold prices proved to be beneficial to the currency, which is strongly influenced by the precious metal due to such a large part of the country’s economy being tied up to the mining industry. Another reason behind the current rise is Australia’s connection to the Chinese economy. It’s not certain for how long the trend will continue, as the tide can quickly turn, but the Aussie is safe for now.

!m[](/uploads/story/144/thumbs/pic1_inline.png)Yesterday, June 12, the Australian dollar slipped on account of current economic troubles in the Eurozone. With Spanish bond yields rising and expected downgrading of AAA countries in the Eurozone by Fitch, a high beta currency such as AUD was clearly suffering. But later that day it found support and regained some of its lost positions. There were two main factors for this recovery. First, being a commodity currency (influenced by gold), AUD has been able to take advantage on gold going over $1600 per ounce, becoming more attractive to investors. The trading partnership with China also had positive impact on the Australian currency, as expectation were that Australia could benefit from China’s efforts to stimulate economy, likely to lead to an boost to commodity orders from Australia’s mining sector. The combination of these two factors allowed the AUD to stop sliding and make some gains. Yet,

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