US Dollar to Australian Dollar (USD/AUD) Exchange Rate Firm; Fluctuations Forecast
If you're looking to make an international money transfer, we recommend TorFX.
This session has seen highs of 1.0660 versus lows of 1.0624. Conversely the AUD to USD exchange rate is residing at 0.9407, just dipping through the 94 US cents mark.
Last week the ‘Aussie’ was able to clamber back up into the 0.9450 region, however in wake of upbeat US data, the ‘Buck’ has climbed against other major currencies.
Representative for the Bank of New Zealand Raiko Shareef commented: ‘The Australian Dollar on Friday was a bit softer on the back of broad-based US Dollar strength, which was mainly driven by Euro weakness.’
The ‘Aussie’ has however been subject to much speculation in recent weeks, with the Reserve Bank of Australia (RBA) Governor Glenn Stevens commenting that the Australian Dollar is overvalued.
Economist David Bassanese commented: ‘Due to valuation concerns, it seems few traders want to hold the Australian Dollar much beyond current levels. It’s all about the carry trade and weight differentials with the US at the moment.’
As the Australian Dollar remains persistently strong in the currency market, the RBA have attempted to bring the currency down to what they believe is a more realistic valuation.
Economist Jeremy Lawson suggested: ‘We would concur that the Australian Dollar is overvalued by as much as 15-20% on a long-term basis. However, those sorts of over-valuations can persist for a very long time. In the short term, what’s been going on is that even though commodity prices have declined, that’s being overwhelmed by two things; one is safe haven flows and central bank reserve diversification… and this has become bound up on the broader search for yield.’
Lawson continued: ‘The number of safe havens has been declining over the last seven or eight years. If you look at the universe of triple-A [rated] assets, it’s much smaller than what it was, and there is still large demand for it. This is, in some ways, good for those who benefit from it, but it does create the risk of mispricing.’
The US has published July’s Markit Composite and Services PMI on Monday.
Composite PMI attained 60.9 in July in comparison to June’s 61.0, whereas Services PMI reached 61.0, the same as June and more favourable than the forecast 59.8.
The currency world also awaits Wednesday’s Federal Reserve’s Federal Open Market Committee’s (FOCM) meeting which will be held on Wednesday, discussing monetary policy for the US.
After the US economy has produced more favourable data of late, speculation for interest rate hikes is becoming more prominent.
For now it appears the US Dollar will remain bullish against the ‘Aussie’ and other majors, with the USD/AUD exchange rate trading at 1.0630.
UPDATED 10:10 GMT 29 July 2014
Tuesday has seen speculation surrounding the Australian interest rate sustainability currently set at 2.50%. Economists are suggesting that the Reserve Bank of Australia may need to consider lowering the official cash rate if the US continues its course of low interest rates which in effect have driven the Australian Dollar (AUD) higher.
Goldman Sachs representative Phil Moffitt commented: ‘The more the Fed works to pacify market expectations of a rate rise, the stronger the local currency gets and the harder it is for the RBA to manage.’
Australia awaits Building Approvals figures on Thursday, but the currency market is rife with speculation regarding the US Federal Reserve’s Federal Open Market Committee meeting on Wednesday which could cause all majors to fluctuate versus the US Dollar.
The USD to AUD exchange rate is currently trading up at 1.0644, contained, at present, between the 1.0620 and 1.0653 range.