US Dollar to Australian Dollar (USD/AUD) Exchange Rate Falling; Iraq Intensifies
The US Dollar (USD) is presently trading up at 1.0800 against the Australian Dollar (AUD) on Friday, following investors’ decisions to place faith in lower risk commodities. This session has reached highs of 1.0827 whilst dipping to lows of 1.0784.
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As the US trades amid escalating involvement with the situation of conflict in Iraq, the US Dollar becomes precarious as a safe haven currency with fears shrouding the ‘Buck’ that this latest conflict could cause another lengthy occupation in the region.
Expert in the field Kit Juckes stated: ‘The prospect of air strikes in northern Iraq on top of the tensions in Ukraine and Gaza… across the board we have stocks weaker, bonds are stronger, the Dollar is weaker and the Yen is strongest of all.’
President for the United States, Barack Obama, commented that recent actions by extremists: ‘have called for the systematic destruction of the entire Yezidi people, which would constitute a genocide. The United States of America cannot turn a blind eye.’
However, Obama has remained a surveyor in the recent global conflict that has dominated news, until now. Obama stated: ‘I have been careful to resist calls to turn time and again to our military. But when the lives of American citizens are at risk, we will take action.’
Furthermore, Obama’s decisions are gaining support from around the globe with UK Prime Minister David Cameron backing the strikes.
Looking ahead, next week will show Australian Business Confidence figures followed by Monthly Budget Statement for the US on Tuesday.
Furthermore the ‘Aussie’ may be influenced by Chinese New Yuan Loans and Aggregate Financing figures on Sunday as China is Australia’s largest trading partner. Wednesday will also see the release of more Chinese figures by way of Retail Sales, Industrial Production, and Fixed Assets Data.
Wednesday will prove influential for the US Dollar as highly significant Advance Retail Sales figures are published alongside Mortgage Applications numbers.
Conversely the Australian Dollar is continuing its downward trajectory in the currency market following the continuation of Iraqi conflict, and the Reserve Bank of Australia (RBA) maintaining low interest rates.
Forex expert David de Ferranti stated: ‘While sentiment was already fragile, today’s news about the air strike authorisation in Iraq has further sapped investor confidence. If we see tensions surrounding the Middle East or Ukraine escalate, the “Aussie” could face further pressure in the short term. However, we have witnessed several flare-ups of geopolitical tensions in recent months, which have failed to leave a lasting impact on the currency.’
Furthermore, the Australian commodity currency has been subject to jawboning tactics in recent months as it’s been stubbornly high in the currency market.
Ferranti continued: ‘This suggests that once the dust settles from today’s panic sell-off, the currency may be afforded some breathing room.’
For now the US Dollar is likely to remain bullish in the currency market against other majors as the US involvement escalates in Iraq; however, the currency market as a whole will remain volatile to such large-scale political events.