The US dollar rebounded last week after Janet Yellen said gradual interest rate hike is appropriate at a time of high uncertainty and that it would be imprudent to keep monetary policy on hold until inflation reach 2 percent target. This aided the attractiveness of the greenback to gain almost 1 percent last week, making it the first monthly gain against its peers since February.
Also, while consumer confidence dipped to 119.8 in September and consumer spending rose just 0.1 percent in August with earnings climbing 0.2 percent, lower than the 0.3 percent recorded in July. The economy remains healthy as the second quarter economic growth rate was revised up to 3.1 percent, from 3.0 percent previously reported. Suggesting the economy is growing at a healthy pace and far better when compared to the U.K. that grew at 0.3 percent and the Euro-area confronted with far-right in Germany and separatists pushing for secession in Spain.
This week AUD/USD, CAD/CHF, NZD/USD and USD/JPY top my list.
AUD/USD
In Australia, fall in global iron ore weighed on the economy and plunged the Australian dollar to its lowest in two months against the U.S. dollar. Since late August, the Australia’s number one export commodity has fallen by 25 percent and expected to dip even further following restrictions on Chinese steel mills, less expansionary fiscal policy and tighter credit conditions. Most experts projected slow economic growth for China, Australia’s largest trading partner. Meaning commodity prices, especially the metal prices are facing a more uncertain outlook going forward as demand for iron ore in Tangshan city, the biggest steel hub in China, has been reduced by half from November to March to better contain extreme pollution during the winter period.
Again, the Australian dollar has been overpriced for a while as stated in the previous analysis and according to the Reserve Bank of Australia governor Philip Lowe higher foreign exchange rate would hurt economic competitiveness of the nation and affect exports. Therefore, while plunged in the Australian dollar will boost exports of farm produce and other non-metal commodity products, it would have no meaningful impact on total exports and weigh on wage growth of workers in the mining sector.
