The Biggest Loser in this Dollar Rally

From Chuck Butler, President of World Markets at EverBank

What Happened:

One of the currencies hardest hit by the dollar’s rally has been the Aussie dollar.

Add to the U.S. dollar strength the fact that the Reserve Bank of Australia (RBA) announced an easing bias following last week’s board meeting.

What I Say:

I have to question the markets’ motive here: Does an announcement of an easing bias automatically mean that the RBA takes rates lower at subsequent meetings this year?

I don’t think so, but that’s what the markets think. And that’s what matters. Together, it’s created the Perfect Storm for the Australian dollar. The aussie is getting hit with storm fronts from the U.S. dollar rally, the RBA’s announcement, and commodity prices. All these forces are converging on the once proud and ready to hit parity to the greenback, Aussie dollar.

Don’t you think that the RBA saw the Australian dollar knocking on parity’s door, and freaked out? I do! And I think that led the RBA to make that announcement on rate bias.

Prior to that announcement, the RBA was all over the “inflation fighting” side of the ledger, so this kind of came from left field. But in reality, the Aussie dollar has fallen 11 straight days, that’s the longest run of sell offs for it since 1975!

The aussie was the star of the currency boards just a few months ago, and now it’s the loser across the board. Will it continue? Stay tuned…

Average rating
(0 votes)