Australian Dollar

Expectations of further monetary easing at the US Federal Reserve have been behind a major boost in the value of the Australian dollar (Currency:AUD) and New Zealand Dollar (Currency:NZD).

As such we see the pound vs Australian dollar exchange rate is now 0.06 pct lower at 15428, the Australian dollar vs US dollar is 0.12 pct higher at 1.0201.


Are the current levels experienced by the NZD and AUD justifiable? UBS do not believe so.

Commenting on the advances is Gareth Berry:

"Market expectations continue to build that Wednesday’s FOMC meeting may produce yet another round of balance sheet expansion, boosting risk currencies like AUD and NZD to unsustainable levels. Our US economics team are sceptical and do not expect any further money creation, although they do expect the policy language to change to indicate the Fed’s greater readiness to ease in future if required, especially given the increased risks to the outlook arising from the Eurozone crisis.

That said, the technical charts continue to back further advances in AUD-USD.

"The pair continues to rally; approaching resistance at 1.0219. Next resistance is at 1.0279. Support lies at 1.0104 ahead of 1.0055," say UBS.

Over at ANZ Bank, the expectations are also that the FOMC is not yet quite ready to act:

"The recent slowing in US activity has increased the likelihood of the FOMC easing policy further but the latest remarks from Bernanke suggests that the FOMC isn’t ready to ease policy just yet.

"As such, we expect that the FOMC will probably say that the downside risks to growth (from global tensions) have intensified and that the Committee stands ready to act as necessary. Moreover, we expect the FOMC will be on the ready to react to an extreme event occurring out of Europe. If the FOMC does ease policy further, however, it is likely to be an extension of ‘Operation Twist’ rather than additional outright securities purchases."

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