Australian Dollar Rises - and Looks Set to Keep Rising

The Australian dollar rises again. It has had another good week against major currencies thanks to low unemployment Down Under and to falling inflation in China.

Peter Lavelle - 9.08.2012

Welcome to my weekly account of changes in the Australian dollar exchange rate, covering the 2nd August to 9th August 2012.

Exchange Rate Changes:

  • GBPAUD: 1.4837 to 1.4787 (-0.337%)
  • EURAUD: 1.1649 to 1.1678 (-0.249%)
  • USDAUD: 0.9569 to 0.9436 (-1.36%)

What's Affected the Australian Dollar This Week?

  1. Unemployment in Australia fell to 5.2%.

    As you can see above, the Australian dollar has had a good week, taking more than a cent from the US dollar in particular. This is chiefly because unemployment in Australia unexpectedly declined in July, falling to 5.2% compared to forecasts of 5.3%.

    This signals that Australia continues to weather the global downturn well, with the economy performing at "a more resilient level" than predicted, according to Employment Minister Bill Shorten. Given this, demand for the Australia dollar remains high, at a time when elsewhere economic performance is declining.

    What does this mean for you if you're moving to Australia?

    If you're moving to Australia, this data means you can expect an easier time finding a job, as well as greater job security. It's in that sense advantageous.

  2. Inflation in China dropped to a 30-month low.

    The Australian dollar also climbed this week because inflation in China fell to just 1.8% in July, its lowest point in 30 months. This signals that the Chinese government can hence inject stimulus into the economy to spur growth, without causing a surge in prices.

    This benefited the Australian dollar meanwhile because China is Australia's biggest trading partner, meaning encouraging news from the Asian tiger tends to reflect on the Australian dollar.

What's Going to Affect The Australian Dollar Looking Ahead?

  1. Australian exports look set to continue to grow.

    In the past four years, the rising Australian dollar has been a big problem for Australian exporters, because it makes their products more expensive for international customers.

    Nonetheless, according to a new study from DHL Export Barometer, 57.0% of Australian exporters expect orders to expand in 2012-3. If they're right, that will mean Australia's trade balance continues to improve, and the Australian dollar will rise too.

  2. The Reserve Bank of Australia looks set to keep interest rates on hold.

    This week, Reserve Bank of Australia Governor Glen Stevens announced interest rates would stay at 3.5%, as the Australian economy had not deteriorated in the global downturn.

    Furthermore, if Australia continues to achieve a trade surplus, and unemployment remains at these lows, there's no reason for the Reserve Bank to cut rates in the future.

    That will mean the Australian dollar continues to climb, as interest rates of 3.5% are much higher than those available elsewhere in the world, making investments in Australia more attractive.

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