Is it 'risk on' for the Aussie dollar?

By Jim Vrondas

Last week in particular saw a sharp increase in risk aversion on global markets due to escalating geopolitical tensions and of course the unexpected rise in the headline unemployment rate.

Movements higher in the US dollar and Japanese yen during times of conflict and with no tier-one economic data are usually a good sign that risk aversion is in play.

However there are early signs that risk appetite is already returning to the markets with the greenback giving up some of its recent gains against the euro and the other safe-haven currency, the Japanese yen, weakening.

Alan has been a trusted source of investment advice to Australians for many years, and in 2005 he founded Eureka Report - Australia’s #1 online investment report.

On the other side of the agenda however we also have the second-quarter Australian Wage Price Index, with growth in wages unlikely to deviate from the previous quarter at 0. 7 per cent.

Unless we get a clear break below US92c in the next week then it is likely the Aussie dollar will gravitate back towards the middle of the range where it is likely to remain until the fourth quarter of the year.

The Reserve Bank has been expecting unemployment to nudge higher, and on Friday in its monetary policy statement it shaved 0. 25 per cent off its 2014 GDP forecast to 2. 5 per cent.

I suspect that despite the possibility of important local data coming in softer than forecast, shifting sentiment towards risk will dictate currency direction.

Read more here: Business Spectator


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