Money The Aussie dollar has been flying over the past month, but the NAB says turbulence is on the way

14:07  14 january  2018
14:07  14 january  2018 Source:   Business Insider Australia

Aussie dollar teeters on the edge of 79 US cents

  Aussie dollar teeters on the edge of 79 US cents The Australian has extended the lift it gained from strong retail trade figures on Thursday, and is heading toward the 79 US cent mark.At 0635 AEDT on Friday, the Australian dollar was worth 78.92 US cents, up from 78.74 US cents on Thursday.

The Australian dollar has been on the charge over the past month , rallying by over 5% against the US dollar . Source: NAB . Alongside the boost the Aussie has received from firmer commodity prices, Attrill says that a “loss of positive USD momentum since early November, a further lift in already

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  The Aussie dollar has been flying over the past month, but the NAB says turbulence is on the way © Saeed Khan/AFP/Getty Images The Australian dollar has been on the charge over the past month, rallying by over 5% against the US dollar.

The AUD/USD briefly traded above 79 cents earlier today, the highest level that it's ventured since late September.

a screenshot of a video game© Provided by Business Insider Inc So, what's been driving this sudden and spectacular revival, seeing it lift from 75 cents to 79 cents in little over a month?

To the National Australia Bank (NAB), almost all of the strength has been due to one single factor: stronger commodity prices.

"Since December 8, the rise in our fair value estimate... is almost entirely explained by the rise in commodity prices with base metals, gold and oil leading the way," says Ray Attrill, Head of FX Strategy at the NAB.

Aussie dollar eyes off 79 US cents

  Aussie dollar eyes off 79 US cents The Australian dollar has yo-yoed higher against its strengthened US counterpart with the focus now on the 78.80 US cent mark.At 0635 AEDT on Thursday, the Australian dollar was worth 78.32 US cents, up from 78.22 US cents on Wednesday.

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"The broadening of the global growth recovery, evident in the healthy December PMI readings across the globe, has undoubtedly been a factor supporting commodities with China’s readings in particular surprising on the upside despite concerns for a potential pullback.

"China’s environmental initiatives have also played a role, lifting demand for higher grade imported coal and iron ore, further enhancing the AUD uplift from commodities."

The Australian dollar has had another strong session

  The Australian dollar has had another strong session The AUD has kicked off the week with a bang. And if the current uptrend continues, it looks likely to break through the US80c mark -- for the first time since last September -- sooner rather than later. Here's today price action on a five-minute chart, via Investing.com:© Provided by Business Insider IncWhile that recent strength against the greenback has partly been driven by sustained US dollar weakness, the Aussie was higher today against all the major trading pairs. According to AxiTrader's Greg McKenna, the outlook for commodities is helping to underpin the Aussie's recent strength.

(Read More: Australian dollar has a huge day, thanks to RBA). "After selling off for the past three months with virtually no relief rallies, we believe that the Australian dollar has officially bottomed," said Lien. While she expects the Aussie to stabilize over the next two months , she says it will

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a screenshot of a cell phone© Provided by Business Insider Inc Alongside the boost the Aussie has received from firmer commodity prices, Attrill says that a "loss of positive USD momentum since early November, a further lift in already buoyant risk sentiment and some chunky M&A announcements, have all played a part in supporting the AUD".

Over the near term, Attrill says the momentum the Aussie has enjoyed over the past month will likely continue, suggesting that it "has room to trade higher and even spend some time back above 80 cents".

However, he thinks the tailwinds for the Aussie are unlikely to last longer-term.

"We think the main forces that have driven the AUD to close to 79 cents -- USD weakness, strong commodity prices, probable M&A flows and super-strong risk sentiment, are unlikely to persist over the course of 2018. And as we saw last September, when one of these factors turns against the AUD, others often do at the same time."

As such, Attrill says the AUD/USD is still likely fall back into the 70-75 cent region in 2018, although he admits that it may take longer than his earlier forecast for the first quarter of the year.

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