Australia's cricket team is doing considerably better than its currency. The Aussie dollar was last week's undisputed loser, falling six cents to its lowest level against the pound in more than three years.
One of the nails in its coffin was home-produced: Reserve Bank of Australia governor Glen Stevens said he was 'open-minded' about the benefits of intervening to push down his currency, implying that the RBA might actually do it.
The Aussie's other depressant, which also helped take the NZ dollar lower, originated in the United States. In the minutes of the Federal Reserve's last policy meeting it said the wind-down of the Fed's $85bn-a-month stimulus might begin 'in the coming months'.
As earth-shattering revelations go it was not one of the most egregious, but it did remind investors that the writing was on the wall for the 'carry trade' in which the higher-yielding antipodean dollars sucked in the proceeds of the Fed's money-printing spree.
There was a bit of a wobble for the euro last midweek when a news agency reported that the European Central Bank is considering a reduction to -0.1 per cent of the rate it pays for commercial banks' deposits. Although the story was attributed only to 'people who asked not to be identified', investors recalled that the ECB president had mentioned such an idea in the past so they could not ignore the possibility of a negative ECB deposit rate.
Clustered at the top of the currency tree were the Scandinavian crowns, the Swiss franc, the South African rand and the British pound. The Scandinavians were there because of unexpectedly strong ecostats, the franc was there because of nervousness about negative euro interest rates and the rand was still feeling the benefit of the previous week's trade deficit revision. Sterling was there because it was the flavour of the month but it is now running into resistance against the US dollar and the euro.
No comments yet