Money 2 charts that explain why the Aussie dollar remains in high demand

08:20  13 october  2017
08:20  13 october  2017 Source:   Business Insider Australia

2 charts that explain why the Aussie dollar remains in high demand

  2 charts that explain why the Aussie dollar remains in high demand While off the highs seen earlier this year, the Australian dollar remains well supported at present on even the smallest pullback. It's looking resilient despite a sharp drop in iron ore prices, Australia's largest goods export by dollar value, along with recent weakness in retail sales which has raised concerns about the outlook for household spending, the largest part of the Australian economy.Seemingly, despite those headwinds and stretched long positioning from speculators, the Aussie still remains in strong demand, comfortably sitting above the 78 cent level today against the US dollar.

Seemingly, despite those headwinds and stretched long positioning from speculators, the Aussie still remains in strong demand , comfortably sitting above the 78 cent level today against the US dollar . These two charts from Tim Baker, strategist at Deutsche Bank, go some way to explaining why the

Seemingly, despite those headwinds and stretched long positioning from speculators, the Aussie still remains in strong demand , comfortably sitting above the 78 cent level today against the US dollar . These two charts from Tim Baker, strategist at Deutsche Bank, go some way to explaining why the

  2 charts that explain why the Aussie dollar remains in high demand © Provided by Business Insider Inc While off the highs seen earlier this year, the Australian dollar remains well supported at present on even the smallest pullback.

It's looking resilient despite a sharp drop in iron ore prices, Australia's largest goods export by dollar value, along with recent weakness in retail sales which has raised concerns about the outlook for household spending, the largest part of the Australian economy.

Seemingly, despite those headwinds and stretched long positioning from speculators, the Aussie still remains in strong demand, comfortably sitting above the 78 cent level today against the US dollar.

The Australian dollar is on the charge in Asia

  The Australian dollar is on the charge in Asia The Australian dollar is on the charge in Asia, jumping back above the 78 cent level in recent trade. Here's the scoreboard as 2.35pm AEDT.AUD/USD 0.7817,0.003,0.39%AUD/JPY 87.85,0.26,0.30%AUD/CNH 5.1453,0.0266,0.52%AUD/EUR 0.6583,0.0018,0.27%AUD/GBP 0.5898,0.001,0.17%AUD/NZD 1.1005,0.0017,0.15%After opening the session at .7787, the AUD/USD was immediately bid from the outset in Asia, grinding higher on the back of US dollar weakness following the release of the minutes of the US Federal Reserve's September FOMC meeting earlier late on Wednesday.

So at week’s end, the Aussie dollar is holding just above 93 cents against the US dollar . Perhaps these two charts from the ANZ of the EPFR fund flow data, showing that capital flows have been It’s not the whole story for Aussie strength but it certainly explains some of the recent buying.

These two charts from Tim Baker, strategist at Deutsche Bank, go some way to explaining why the Aussie continues to find buyers.

The first shows movements in the AUD/USD versus pricing for the RBA cash rate looking 12 months ahead.

  2 charts that explain why the Aussie dollar remains in high demand © Provided by Business Insider Inc Even with a recent pullback, the expectation that the RBA will start to lift interest rates next year has clearly bolstered the Aussie.

The second chart is also telling, showing the relationship between the AUD/USD and the performance of emerging market stocks compared to those in developed markets.

  2 charts that explain why the Aussie dollar remains in high demand © Provided by Business Insider Inc Baker says that the outperformance of emerging market stocks this year has been a major factor that's underpinned the Aussie's rally.

While the iron ore price has dropped, global growth and emerging market equities by extension have supported the AUD," he says. "AUD tends to do well when emerging market outperforms developed market [stocks]."

Looking ahead, Baker says that the AUD/USD's recent move back above 78 cents is likely to be sustained in the near-term, although he thinks that there are downside risks for the Aussie against emerging market currencies.

"Our Blueprint trade is short AUD vs a basket of the Colombian peso, Indonesian rupiah, Mexican peso and Russian ruble," he says, adding that the Aussie looks quite stretched versus these currencies given where commodity prices currently sit.

The Australian dollar is grinding higher .
The Australian dollar ground higher on Tuesday after falling to a three-month low earlier in the session, benefiting from improved investor sentiment and continued strength in stocks. Profit-taking in the US dollar ahead of major data releases -- including this Friday's non-farm payrolls report -- was also a contributing factor.Here's the scoreboard as at 7.30am AEDT.AUD/USD0.7835,0.001,0.13%AUD/JPY88.41,0.17,0.19%AUD/CNH5.2237,0.0026,0.05%AUD/EUR0.6669,0,0.00%AUD/GBP0.5918,0.0025,0.42%AUD/NZD1.0941,0.0069,0.63%AUD/CAD0.9783,-0.0001,-0.01%Having hit a three-month low of .

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