- Category: Australian Dollar Articles
- Published on Tuesday, 19 February 2013 11:48
- Written by Rob Samson
The Australian dollar (Currency:AUD) is firmer across the board today as fears over an interest rate cut at the Reserve Bank of Australia in the near future subside:
The pound / Australian dollar exchange rate is 0.18 pct lower on last night's close at 1.4983.
The euro / Australian dollar exchange rate is 0.44 pct down on yesterday at 1.2901.
The Australian dollar / US dollar exchange rate is 0.33 pct higher at 1.0341.
Please note that the above numbers are spot quotes from the wholesale markets - your bank will affix their own spread charges when passing on their quote to retail customers. It is worth noting that independent FX providers guarantee to beat your bank's offer, thus delivering you more currency. Please find out more on this here.
What the above numbers are telling us is that the market may be thinking a cut is less likely at this stage due to a somewhat weaker AUD in the last month, a solid rebound in consumer confidence, and relatively strong Australian equity market that suggests conditions may be improving. As such, the RBA may well sit in wait and see mode a bit longer.
Keep an eye on Australian stock markets and what they are telling us about the strength of the Australian dollar
"A development we need to give more consideration to is the strong and out-performing Australian equity market over recent months. It suggests that the recent relative softness in the AUD may not last," says Greg Gibbs at RBS.
|Live Charts and
Aus Exchange Rates
Weak currencies might tend to boost the local equity market to the extent that their earnings may be stable in foreign currency terms and thus worth more in domestic currency terms.
And because a weaker domestic currency may reduce company costs and make them more competitive and more profitable in export markets or import-competing markets (tradeable goods and services).
The recent out-performance of the Australian equity market may in part be due to a recent softening in AUD over the last month.
However, the AUD still remains at historically expensive levels thus, according to Gibbs, it also shows that Australian companies have adjusted to a high exchange rate regime (above parity against the US dollar) and are more robust able to cope with its contractionary influence.
"The broad-based gains in the stock market, especially in sectors like consumer discretionary stocks and industrials that might be damped down more by an expensive exchange rate suggest that the RBA should not be rushing to cut rates in coming months," says Gibbs.
Gibbs thus believes that a return to gains territory for the Australian currency is nigh.
Related: Pound / Aus Dollar
- Australian dollar under the cosh as iron ore prices slump; New Zealand dollar continues to enjoy benefits of buoyant dairy industry
- Pound sterling down versus Australian and New Zealand dollar's today; but 'weakening AUD drivers remain in place'
- Outlook for the Australian dollar likely to be driven by expectations over interest rate cuts at the Reserve Bank of Australia
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