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Does the aussie look like a falling knife?

Posted by WorldWideMarkets . on May 28, 2013 2:09:00 AM
Aussie viewpointThe short answer is probably yes. While the Australian unit has dropped about 8 U.S. cents against the greenback in the last month and a half, it may just have been a long overdue correction. Who can forget the early part of the new century when it traded at 59 U.S. cents and the only game was the U.S. currency. The problem for the aussie is the same as they have had since colonial times and even Federation 110 or so years ago. Too often it’s one sector that carried along the rest and one trading partner that grows to dominate then falls away. In recent years it has been all about what can be mined from the ground, which was fine as long as Chinese factories were humming along. But Chinese data has not been as promising of late even as it remains impressive by global standards. And where previously, higher relative interest rates from the RBA kept foreign investment inflows aussie supportive, those rates are not as high and investors are keeping one eye on the Fed for an end to QE. The aussie has gone below parity before in recent years and come back but this time round things are looking more tenuous.
 

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