3rd Jully 2014

Australia Dollar falls victim to jawboning; Krona suffers against Sterling


British Pound

Euro to Pound

The Pound benefitted from the Reserve Bank of Australia’s jawboning of the ‘Aussie’ today, after the Bank described the Australian Dollar as ‘overvalued, and not just by a few cents’. The Pound subsequently rose against the Australian Dollar by 0.50%. The Krona also slumped against Sterling after the Riksbank cuts its main interest rate by 0.5 percent, which was double the cut anticipated. The Pound to Krona exchange rate climbed by 1.76% after the decision was announced.

The UK’s Composite and Services Markit PMI both returned at lower than economists forecasted, which is subsequently causing the Pound to weaken slightly, although it has not yet descended to levels preceding the jawboning of the Australian Dollar.

Euro

As well as climbing against the Australian Dollar (AUD), the Euro rose against the Polish Zloty amid concerns over leaked recordings of the National Bank of Poland discussing the ousting of the Polish Finance Minister, which continued to weaken Poland’s currency.

The Eurozone Markit data came with mixed results, with positive Italian and French Composite and Services PMI figures meeting disappointing German results. The upbeat former data managed to cushion the Euro from Germany’s poor figures however, meaning the Euro is maintaining a stable position against its major peers.

US Dollar

The US Dollar to Pound exchange rate has been falling over the past 12 months but climbed slightly today as UK Composite and Services data for June returned lower than expected. The ‘Greenback’ reached a peak of 0.5840 before falling, in spite of upbeat employment data, as investors were intimidated by continuing concerns regarding the possibility of the US keeping interest rates on hold for some time to come.

Against the Australian Dollar, the ‘Buck’ continued to climb out of Tuesday’s month-low slump, which occurred after the Reserve Bank of Australia declared that interest rates would remain unchanged. Following the RBA’s decision to talk down the ‘Aussie’, the US Dollar managed to strengthen to levels nearing pre-slump level and is now stabilising again.

Canadian Dollar

The Canadian Dollar was bolstered against the South African Rand today as South Africa continues to suffer from a poor economic outlook and prolonged strikes in the metal industry – involving over 200,000 workers. The ‘Loonie’ reached a peak of 10.12 before beginning to drop and has since continued to fall.

Against most of its major peers, the Canadian Dollar has been strengthening recently and benefitting from ‘slow daily gains’, according to the Bank of Nova Scotia’s Camilla Sutton. A more optimistic global economic growth outlook combined with Tuesday’s upbeat manufacturing data for China has contributed to its buoyancy and Société Générale’s Kenneth Broux, Carole Laulhere and Santosh Ejanthkar have said that the Canadian Dollar is ‘in good stead to replicate the gains of previous years.’

Australian Dollar

Following the Reserve Bank of Australia’s decision to jawbone the Australian Dollar, the ‘Aussie’ has fallen against all of its major peers today. Much of the softening occurred at the levels around -0.50 percent and the ‘Aussie’ is now facing the biggest two-day drop since January. The governor of the RBA said that investors were underestimating the prospect of there being a significant fall in the ‘Aussie’, which resulted in investors abandoning the Australian Dollar for safer currencies. JPMorgan Chase and Co’s chief economist, Stephen Walters, predicts that ‘jawboning likely will continue’, suggesting the ‘Aussie’ may be subject to further softening in the near future.

New Zealand Dollar

Following the release of the UK’s composite and service PMI data, the New Zealand Dollar strengthened slightly against Sterling, and was further bolstered at 10:40 GMT by rising New Zealand shares. Metro Performance Glass and Scales Corp sought to raise a total of $460 million from selling shares and were subsequently taken up on the offer by Meridian Energy, Tower and Diligent Board Member Services.


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