Forex Blog: Currency Trading News & Analysis.

February 27th 2006

Australian Dollar pulled in both directions

For the better part of a year, the Australian Dollar (AUD) has remained relatively constant in value, hovering around .75 USD. Economists and analysts have identified several factors that are preventing the AUD from moving by pulling the currency in opposite directions. On one hand, commodity prices and Australian economic fundamentals continue to perform strongly, which would seem to drive the AUD upward. On the other hand, the interest rate differential between the US and Australia has narrowed to only 100 basis points, which may not be enough to bring the capital of risk-averse foreigners to Australia. By the same token, many investors are moving funds to New Zealand, where interest rates exceed 7%. The Sydney Morning Herald reports:

All told, last year saw the lowest degree of variability in the Aussie’s value in any year since the float in December 1983.

Read More: Goodness knows why our dollar’s so stable

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Posted by Adam Kritzer | in Exotic Currencies, Investing & Trading | No Comments »

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