The Australian dollar trimmed yesterday’s gains versus the US dollar and reversed the rally versus the Japanese yen today as the negative market sentiment hurt growth-related currencies, while the Goldman Sachs forecast added to the woes of the Aussie.
The market sentiment was poor amid concerns about Chinese growth slowdown and concerns about the situation in Ukraine, making traders favor safe currencies, not riskier ones. Goldman Sachs said:
Our bearish Australian dollar forecast is underpinned by expectations that US data weakness is transitory, headwinds to Australian growth are intensifying, the next phase in the decline in the terms of trade has commenced and capital flows are turning less supportive. Geopolitical risks and ongoing concerns over the impact of tightening Chinese financial conditions together risk a more immediate downward adjustment in the Australian dollar.
The agency predicted that the Aussie should drop to 0.80 against the greenback.
AUD/USD declined from 0.9030 to 0.9024 as of 13:32 GMT today, but remained above yesterday’s opening level. AUD/JPY, on the other hand, declined closed below the opening yesterday and continued to fall today, dropping from 91.94 to 91.44.
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