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Australian Dollar Has Worst Week Since 1985

October 3, 2008 at 9:44 by Andriy Moraru

Australian dollarThe Australian dollar posted the biggest weekly loss since 1985 against the U.S. dollar this week, as the traders dumped their positions in the high interest rate currencies, while the situation with the global financial system remained uncertain.

The reduction of the carry trade positions (trade technique that is based on gaining positive interest rate difference through the holding of a long position on a currency with a higher yield) pushed both Australian and New Zealand dollars down against the Japanese yen this week.

Despite the huge AUD’s drop this week and the last two months, the analysts believe that there is still a lot of potential for the Australian dollar (also called Aussie) to fall against the U.S. dollar. Apart from he general risk-aversion there is also a very high probability of the further rate cuts in Australia; those are not yet priced in the AUD/USD rate.

Perhaps, it’s a good time to sell the Aussie, because many currency strategists believe that next week AUD/USD rate will fall further to the levels near 75 cents after the bail-out plan adoption will increase the demand for the U.S. dollar.

AUD/USD rose a little today — from 0.7729 to 0.7752 as of 7:31 GMT; this week it fell almost 6.3 percent. AUD/JPY rose from 81.37 to 81.49 today after falling almost 7.3 percent this week. NZD/USD traded more stably this week and rose today from 0.6568 to 0.6617 after dropping «only» 3.4 percent this week.

If you have any questions, comments, or opinions regarding the Australian Dollar, feel free to post them using the commentary form below.

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