In the last month or so we have seen the market starting to peak up the AUD causing the AUD to gain around 7% against the greenback rising from around 0.65 USD to 0.7 USD. Although this move had a strong back wind from the latest anti Dollar rally it seems the real drive for this AUD strength is commodities, and more specifically commodities sold to china. Commodities exports to China pose Australia’s largest export and main engine of growth. China’s declaration of a 585 Billion dollar stimulus which is aimed mainly at infrastructure expenditure is expected to boost commodities demand and therefore be in favor of their provider, Australia.
But maybe the AUD current level is already pricing in that demand? Before the crisis full erupted the AUD/USD was aiming the 1.00 target, however then commodities demand soared now they are at a rock bottom. Eventually china alone can not lift itself alone to pre-crisis levels without world demand increasing and when china’s growth prospect are limited so is demand for commodities and evidently the AUD .When the growth years are back to the world, the AUD will be well placed to rally to the 1.00 level and beyond but until then any AUD rally has limited prospects.
*Please acknowledge that this is my opinion alone and is not an investment or a trade advisory in any sort or way.
Under the wings of the Asian dragon
