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Dollar gains on rates outlook

Mar 24, 2014

The Australian dollar continues gain ground helped by the local interest rate outlook and the strength of the economy.

Early Monday, the local unit was trading at 90.90 US cents, up from 90.68 cents on Friday.

BK Asset Management managing director Boris Schlossberg said the currency had outperformed most other currencies in the past few days.

“The strength in the unit caught many traders by surprise,” he said.

“The market is becoming more and more convinced that the Reserve Bank of Australia’s easing cycle has ended with the rate curve no longer pricing in any further cuts.

“The anticipated fallout from the slowdown in China has not had the negative impact that many analysts feared.

“Australia has been able to somewhat rebalance its economy away from mining and exports to services and retail, as evidenced by last month’s strong employment report.”

The Australian dollar fell as low as 89.95 US cents last week after the US Federal Reserve said it could start raising its interest rate in the first half of 2015.

Since then, it has steadily moved upwards, peaking at 91.02 US cents early on Saturday morning, Australian time.

Schlossberg said the currency initially would struggle to rise above 91 US cents and stay there, but that could change if the tensions between Russia and the Ukraine ease and the market becomes more optimistic about the global economy.

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