Australian Dollar Rises Amid Encouraging Earnings from Major US Companies

Strategic Insights -

The Australian dollar rallied on Friday, buoyed by strong earnings from major US companies, including Intel and Goldman Sachs, which lifted hopes of a recovery in the American economy. The local currency rose to $US0.8003/06, up 0.49 per cent from Wednesday's close, as financial markets continued to rally on the back of positive earnings reports. RBC Capital Markets senior currency strategist Sue Trinh attributed the dollar's rise to the strong earnings and forecasts from major US banks, which boosted investor sentiment and lifted risk proxies like the Australian dollar.

Key Takeaways:

  • The Australian dollar rose to $US0.8003/06, up 0.49 per cent from Wednesday's close of $US0.7963/68, as encouraging earnings from major US companies boosted hopes of a recovery in the American economy.
  • The Dow Jones Industrial Average closed 3.07 per cent higher, and the broader Standard & Poor's 500 index was up 2.96 per cent, fueling a rally in financial markets.
  • Goldman Sachs reported a net profit in the second quarter 65 per cent more than the corresponding period in 2008, driving investor sentiment.
  • Sue Trinh, RBC Capital Markets senior currency strategist, attributed the dollar's rise to strong earnings and forecasts from major US banks, including Goldman Sachs and Intel.
  • The Reserve Bank of Australia's trade weighted index (TWI) rose to 63.8, up from Wednesday's close of 63.4.
  • The Australian currency had drifted lower after starting the local session at $US0.8031, as investors booked profits on recent gains and caution entered the market ahead of earnings reports from other US banks.
  • JP Morgan, Bank of America, and Citigroup are scheduled to release their June quarter results later this week.
  • Commissioner Trinh forecasts the Australian dollar to trade between $US0.7960 and $US0.8050 for the rest of the local session, with the risk at the lower end of the range.

Statistics:

  • The Australian dollar rose by 0.49 per cent to $US0.8003/06.
  • The Dow Jones Industrial Average closed 3.07 per cent higher.
  • The Standard & Poor's 500 index was up 2.96 per cent.
  • Goldman Sachs' net profit in the second quarter rose by 65 per cent compared to the same period in 2008.
  • The Reserve Bank of Australia's trade weighted index (TWI) rose to 63.8 from Wednesday's close of 63.4.

Sources:

  • Sydney Morning Herald, July 16 (Asia Pulse)
  • AAP, July 16
  • RBC Capital Markets, Sue Trinh (quoted)