Australian dollar review - 26/09/2012

[John from Moneycorp]

The Australian dollar did not do quite as badly as the euro but it was a close-run thing. Investors ran away from the European currency in response to fading optimism that there would be any early resolution of the euro area's problems. At the same time they reduced their holdings of commodity-related currencies because of fading optimism for the global economy.

 

The Aussie suffered more than its peer group. It was not because of the week's Australian economic data, which were limited to new vehicle sales (6.4% up from a year ago) and leading indicator reading, which pointed to slower growth. The currency's weakness stemmed from concern that the mining boom has peaked and that consolidation, not growth, will be the new order. Local analysts are now looking for the Reserve Bank of Australia to lower its cash rate benchmark in coming months, perhaps to 3%. That changed outlook has dented investors' appetite for the Aussie.