Currency News: Australian Dollar on The Rise & U.S. Dollar Continues Its Decline

Currency News

Australia: Low Inflation Causes Rate to Remain Unchanged

On Tuesday, September 6, 2016, the Australian dollar had gain substantial value over the USD, at a 1.7% gain, when compared to March of 2016, its longest rally ever. The reason was due to the Reserve Bank of Australia’s (RBA) Governor Glenn Stevens stating they would not change as global factors helped attract more foreign capital flow into the economy, as well as reports of low inflation in the Australian economy.

Currency News

The global factors had included weak job data reports from the U.S, causing uncertainty in whether the Fed would raise their own interest rates come September. Additionally, China’s economy has shown signs of stabilization, which is as well a positive sign for Australia, as they are their largest trading partner in the region. Although for many consumers in australia this may seem like a positive note, this will also lower exportation from Australia as the dollar becomes more expensive abroad, hurting GDP growth.

United States: Poor Economic Performance Causes Further Decline in The U.S. Dollar 

The U.S. dollar dropped to its five-week low today, on September 7th, 2016, as a result of a low expansion in the service industries in America. The expansion was the lowest in 6 years, and further fuels uncertainty for an interest rate increase in September. Last week, a news article was written about the dollar’s appreciation, as economic data had shown employment reaching the full employment level, dictated by the Fed. However, with an economic slowdown insight, in the world’s largest economy, it may cause the Fed to not change their monetary policy direction, in relation to a global consensus on the monetary policy. That is to drive stimulus growth, and spur inflation, as shown by countries like Japan.

Currency News

Currently, the odds of a rate increase in September have fallen to only 24%, whereas the likelihood was at 34%, one week prior. The weak U.S. economic reports have as well caused emerging-markets to gain momentum in the equity market, as commodity prices fall, they are seen as a better alternative. For example, Taiwan’s dollar has gained 1.5% (relative to the USD), its largest gain since 2009, as investors seek higher returns and more worthwhile alternatives for their investments.

 

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