How quickly things can change. With all of our major LME metal indicators now trading lower than they opened at the beginning of the month, all eyes are on the falling Australian Dollar which is softening the AUD price reductions that we are seeing on commodities in USD terms.
For months now we have been reporting that the HSRA rate had averaged 0.93xx since April, however within 1 week the Australian Dollar has dropped 3.6% dipping below 0.90 during the week.
An interesting note from Bloomberg.com this morning noted that RBA Governor Glenn Stevens said the market was underestimating the risk of depreciation, and that its strength was impeding growth as global commodity prices slide.
Official data suggesting that China, Australia’s largest trading partner, will miss its 2014 growth target will be another excuse to drive the Aussie lower after it touched a six-month low of 89.84 cents yesterday, Barclays Plc predicted. The poor Chinese data was also used to explain copper futures falling to 3 month lows.
**** Dollar Resistance Futile as Aussie Sell Options Rise ****
By Kristine Aquino, Hiroko Komiya and Kevin Buckland
The last holdout to the U.S. dollar’s world-beating rally is crumbling, and the derivatives market signals there’s no relief on the way anytime soon. Australia’s dollar slid below 90 U.S. cents today for the first time since March as evidence of a slowdown in China and a weak domestic economy boosts the chances the South Pacific nation will hold interest rates at a record low. The U.S., meanwhile, is moving closer to raising borrowing costs. While the Aussie is the only Group of 10 currency to advance against the greenback this year, its gain has eroded to 1.2 percent from 6.5 percent at the start of July. “This is the big dollar crushing all in its path,” David Bloom, the global head of currency strategy at HSBC Holdings Plc in London, said by phone on Sept. 11. “The big dominoes have dropped — the pound, euro, yen — and that’s now taking the smaller dominoes with it. The Aussie should’ve been lower anyway, so this is more of a reality check.”