Markets Weekly Outlook: US Dollar, Dow Jones, Australian Dollar, Crude Oil. Two currencies that are frequently under the spotlight of international investors are the US Dollar and the Australian Dollar.
The daily US Dollar price against major world currencies is always low, with the exception of the Japanese Yen, which is slightly more expensive than it normally would be, when buying foreign currency. On the other hand, the Australian Dollar is often undervalued when compared to the US Dollar, even though the Australian Dollar is becoming more liquid in a global sense. The value of the Australian Dollar is determined by what the Australian government is able to sell for the Australian Dollar at any given time.
What can a country sell for the Australian Dollar? The Governor of the Reserve Bank of Australia, Glenn Stevens, stated during the Australian central bank’s monthly meeting, “Despite recent pressures on the currency, we are not anticipating a major appreciation of the Aussie dollar.” He said he was watching currency movements closely and did not want to push up the Australian Dollar too much, lest that encourage investors to seek out a replacement for the Australian Dollar.
This leaves two important questions unanswered, with regard to the Australian central bank, and the US Dollar. To begin with, there has been so much talk about the strength of the US Dollar lately, that some believe the AUD/USD has already exceeded the 1.20 level set in May of this year. Another significant question for the US dollar and the AUD/USD is, do we see the AUD/USD achieving or surpassing the level set at the start of August last year?
Can the AUD/USD survive the strength of the USD? Perhaps, but we don’t think it will happen before the end of the year. And yes, we know it was stated by a central banker that, “The dollar remains a mainstay of trading for global investment portfolios. Given the current environment of economic uncertainty and weakness in emerging market economies, the strength of the U.S. dollar is likely to continue.”
With respect to the AUD/USD, Markets Weekly Outlook: US Dollar, Dow Jones, Australian Dollar, Crude Oil is considered one of the most important issues for the average investor and trader, who will be placing trades on a daily basis with a major exchange. In this article, we will focus on these issues.
One of the best explanations for the strength of the US Dollar is the Federal Reserve System. For investors in the AUD/USD, Markets Weekly Outlook: US Dollar, Dow Jones, Australian Dollar, Crude Oil will try to understand what is going on within the system, and why is it favorable for investors.
After all, an economy that is weak, as it currently is, will not make the same promises as an economy that is strong, as it would if it were in the midst of the greatest economic boom. And when things become difficult, as they very well could, that is when the Federal Reserve System, will put the brakes on its stimulus program, and that will lead to a weakening of the USD.
In the same vein, another reason why we are attracted to AUD/USD has to do with the popularity of the Reserve Bank of Australia. We believe that the AUD/USD will continue to appreciate until the other developed economies of the world, such as the US and Canada, start seeing more stability in their economies.
As the central bank of Australia has managed to avoid a major depreciation of the AUD/USD, it has been successful in maintaining stability. It is also a fact that we do not believe that there is any fundamental reason for the Australian Government to devalue the currency. A strong country does not need to devalue its currency.
In fact, the only way to raise the AUD/USD to values similar to what the AUD/USD is currently set at, would be to devalue the US Dollar, or some other leading currency. But that is a long shot. With respect to the USD, our Markets Weekly Outlook: US Dollar, Dow Jones, Australian Dollar, Crude Oil will try to explore whether or not the AUD/USD will continue to rise through the strength of the USD and the Reserve Bank of Australia.