Is the Australian Dollar Strengthening Against the US Dollar?

AUDUSD

Is the Australian Dollar Strengthening Against the US Dollar?

AUDUSD stands for the Australian Dollar Unit Price Index and is derived from the Australia Purchasing Managers Index. The index is a price basket that includes a large assortment of common domestic consumer goods such as sugar, electricity, gasoline, foods, drinks, health care, education, and household services among many others. The Purchasing Managers Index also takes into consideration a number of economic indicators including current account balances, gross domestic product, and government borrowing and lending. As such, it is not surprising that many economic researchers consider it one of the most reliable estimates of inflation rates throughout the market. It is also considered a reliable measure of economic performance and is said to have a strong track record over the past fifteen years.

The main factors driving the Australian Dollar Unit Price Index are mainly due to the commodity and energy sectors of Australia. Commodities are measured in terms of energy quantities and are generally traded in pairs. Examples of these include coal, iron ore, wheat, and natural gas, while natural gas and petroleum are traded separately. Over the last few years, AUDUSD has consistently performed strongly, which is attributed to the increasing demand for commodities and the slowing trend of global economic growth.

The AUSUSD currently trades in a range of two major currency pairs, which are the AUSUSD/ NZD and AUSUSD/EUR. In addition to these, there are forty other major pairs that are traded on the market. These include the AUSUSD/ NZD, AUSUSD/CHF, AUSUSD/GBP, AUSUSD/JPY, and AUSUSD/CHS. Generally, these are the most commonly traded and popular Australian currency pair, which is often referred to as the AUSCAD.

The recent weakness of the AUSUSD against the major currencies that it is linked to, have resulted in some short-term fluctuations in the Australian Dollar Unit Price Index (AUSCAD). However, this short-term volatility is expected to end within the next two weeks. During the time frame of two to four weeks, the strength of the AUSCAD will be sustained and could even go higher. In the meantime, investors who are already bullish in their Australian Dollar Unit Price Index (AUSP) will have more room to ride.

Although it has been speculated that the AUSP will weaken against the AUSUSD, the market analysts believe that the strength of AUDUSD will continue to strengthen, as the Australian economy continues to flourish. The strength of the Australian Dollar is attributed to the low interest rates and high employment levels in the country. The strength of AUDUSD can be attributed to the fact that the currency exchange rate between the two countries is not connected to any other major economic indicators. The strength of the Australian Dollar also stems from the fact that there are no fundamental economic factors that could affect the Australian economy.

There is no fundamental reason why the AUSP should weaken against the US dollars. In fact, there are several reasons that the market experts believe that the strength of AUDUSD will continue to increase. One of the reasons is the continued depreciation of the Australian Dollar against all major currencies, particularly the US dollars. With a declining USD, there is expectation that the Australian Dollar will gain further strength against the US dollars.

Another reason why the AUDUSD should weaken against the US dollars is that, based on reports, there are growing doubts about the sustainability of Australia’s exports in the face of rising imports, which is due to the rising commodity prices. Recent reports also indicate that the demand for Australia’s commodities is likely to decelerate. This could result in increased deflation, and lower commodity prices, which will have a negative impact on the Australian economy.

Based on these reports, it is clear that there is a need for Australia to strengthen its currency in order to retain competitiveness in exports of agricultural products, petroleum and other minerals, and other important commodities. Given the current weakening of the US dollar, and the prospect of a US Federal Reserve that will keep its interest rate on hold until at least later this year, it is important for Australia to take action in strengthening its currency. However, the recent announcement by the AMP Capital Markets Limited that it will buy a stake in Metcash, one of the most successful companies in the mining sector, in an effort to strengthen the AUDUSD is yet another example that the weakening of the Australian Dollar is being driven by external factors outside of Australia’s control. This is contrary to arguments that suggest that the weakening of the Australian Dollar is due to domestic economic issues and a weaker economy within Australia.