Worldwide Markets Influence on the Australian Dollar

Today is proof that worldwide markets influence the Australian dollar. I watched as the Australian dollar fell by a substantial amount today. Why? Well if you don’t yet already know, it all started in China. Stock prices fell in China, then overnight in the USA. Australian markets followed the next day. Looks like the Aussie doesn’t look like a good currency to hold at the moment since the big players are in risk aversion mode. Investors are seeking to unwind their carry trade risk. However a slight bounce today in the forex markets came as economists said that an interest rate hike in Australia in the coming months remains on the table. Today the Aussie currency hit lows of around 78.55 cents compared to recent highs of about 79.50 cents. There is also plenty of economic news coming out of USA overnight such as the fourth quarter US GDP data – any hint of weakness and you know what will happen. Also any signs of rising stress in the U.S. sub-prime mortgage backed debt market might also be a negative influence. You’ve got to remember, there is also the geopolitical risks to consider. There are also the looming ambitions of Iran for nuclear and the US military presence in the region. Tony Morriss, a senior currency strategist at ANZ has said that, “The Australian dollar does not perform well during periods of risk aversion and it opened on the defensive this morning given the size of the overnight moves in stock and commodity markets.”