Australian Dollar Slides Below $US0.7500 on US Interest Rate Hike Expectations

Strategic Insights -

The Australian dollar continued to struggle in morning trade, sliding below $US0.7500 as expectations of another US interest rate hike supported the US dollar. The local currency reached a low of $US0.7487, its lowest level since May 22, and a high of 0.7630. Deutsche Bank currency strategist John Horner attributed the currency's weakness to concerns over market volatility and continued US Federal Reserve tightening.

Key Takeaways:

  • The Australian dollar slid below $US0.7500 in morning trade, reaching a low of $US0.7487 and a high of 0.7630.
  • The local currency's weakness was attributed to expectations of another US interest rate hike and concerns over market volatility and US Federal Reserve tightening.
  • Deutsche Bank currency strategist John Horner stated that the local dollar could come under further pressure and potentially move down towards the $US0.7400 mark.
  • Today's capital expenditure data showed real private capex rising 0.6 per cent in real terms compared to expectations of a rise of two per cent.
  • The sixth estimate of expenditure for 2005/06 was $71.443 billion, 23.6 per cent higher than the comparable estimate for 2004/05.
  • The second estimate of expenditure for 2006/07 was $58.877 billion, 20.5 per cent higher than the second estimate for 2005/06.

Statistics:

  • The Australian dollar traded at $US0.7487 at 1200 AEST.
  • The local currency had tumbled more than one US cent overnight, from yesterday's close of 0.7636/41.
  • The FOMC indicated its main concern centered around upside risks to the inflation outlook.
  • Expectations of further US Federal tightening weighed on the local dollar, potentially leading to further pressure and a possible move down towards $US0.7400.
  • Real private capex rose 0.6 per cent in real terms, compared to expectations of a rise of two per cent.

Sources:

  • (Asia Pulse)
  • (AAP)
  • Deutsche Bank