It was reported on 20 August 2013 that the two south Pacific currencies had taken sharp drops following previous high points the day before. Analysts point to yesterday’s release of the minutes from the Reserve Bank of Australia as playing a distinctive role in the continued devaluation of the Aussie. In their discussions during their monthly meeting, the monetary board expressed that while they are not inclined to cause any change to the interest rates at this time, they were inconclusive regarding when such a change may occur.
Experts believe that the Reserve Bank is attempting to keep the Aussie at a lower value in an effort to encourage growth in the slowed economy. The devaluation of a nation’s currency can often help to make their exports more desirable in the global economy.
In neighboring New Zealand, comments by their Reserve Bank governor, Graeme Wheeler, indicated that new bank lending restrictions are likely to come into effect in the near future. The intention to reduce the availability of borrowing comes as the country is attempting to head off a housing bubble that has significantly increased the prices for home buyers to undesirable levels.
Analysts believe the Aussie to be far too volatile for trading at this juncture. As such investors are advised to proceed with extreme caution in approaching the Aussie in its pairings. For its part, the Kiwi should also be handled with care, even though it can be considered a safer currency than the Aussie at this time.
Investors Begin Returning to Western Economies, Abandoning Emerging Markets
In a report issued on 20 August 2013, experts have begun to point to a gradual shift of focus by investors from the Asian markets back to those of the US and Europe. Should this trend continue, it may help to boost the economic turnaround that many have been waiting for, in addition to playing a role in raising the value of their currencies.
Observers have pointed to a variety of factors affecting this trend. Firstly, the economic slowdown in China and across the region as liquidity has restricted in those markets. Many of the Asian markets are experiencing recessions of their own, thus reducing demand for goods and services. Secondly, concerns over the failure of these economies to enact necessary reforms into their economies. Due to the fact that many of these countries lack the unified infrastructure needed for long term growth and regulation, they are struggling to face many of the challenges brought on by shifts to the economic realities. Thirdly, there has been a noticeable upward change in the US economy, leading many to believe that the US Federal Reserve may decide to start stepping away from their $85 billion stimulus activities, thus increasing the desirability for returned investment in the US. For its part, the Eurozone appears to also be on the path to recovery and may also benefit from the change of fiscal direction.
Analysts believe that investors will likely be able to see evidence of this shift in the coming months as capital begins to flow back towards the advanced economies, drawing away from the emerging markets as they attempt to put their structural houses in order and address their issues. Traders are advised to look for rises in the USD and Euro as this trend becomes more prevalent.
Canadian CPI Report to be Issued on Friday
The Consumer Price Index report for Canada is set to be released on Friday 23 August 2013. Analysts remind readers that the Consumer Price Index helps to provide a point of reference from which economists can better judge the state of the economy. Moreover, it helps to anticipate changes in inflation, thus affecting the value on the currency in question.
Observers are currently expecting to see a slight rise in the CPI report for July as the CAD suffered some cuts in value due to volatility in the market.
Traders are advised to prepare for potential shifts in the value of the CAD for its pairings in both the lead up to and following the issuance of tomorrow’s report.