The Australian dollar pared its yesterday’s decline, but the outlook for the currency is still rather pessimistic. The Australian currency extended its yesterday’s fall against the euro.
France and Spain are going to auction debt today. Yield on the Eurozone bonds is the center of attention this week and market participants consider it as an indicator of the situation in Europe. Previously, soaring borrowing costs were negative for market sentiment and it’s very likely that today’s auction will hurt traders’ mood even more. Yet, a positive outcome of the auction may again trigger optimistic mood and risk appetite.
The pessimistic outlook makes investors to expect an interest rate cut by the Australian central bank. The Reserve Bank of Australia will decrease the interest rates by 157 basis points over the next 12 months, according to the Credit Suisse Group index. The potential cut of the rates hurts prospects of the Australian currency as the relatively high borrowing costs attract carry traders, adding to appeal of the Aussie.
AUD/USD traded at 1.0099 after falling yesterday from 1.0176 to 1.0082, while AUD/JPY was at about 77.75 after yesterday’s downfall from 78.38 to 77.68 today as of 6:23 GMT. EUR/AUD was up today from 1.3347 to 1.3361 and touched the intraday maximum of 1.3399 earlier.
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