Australian dollar faces headwinds

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The Australian dollar is poised to rack up its 3rd straight day of gains in today’s trading session against its US counterpart and some analysts say it maybe just a relief rally and now is a good time for an exit strategy.

Analysts from ANZ noted that there is no positive local data to support any rise in the Aussie dollar as the RBA are expected to keep interest rates on hold for up to 2 years while other countries are expected to lift interest rates such as Canada, which is poised to move next week.

This makes the Australian dollar unattractive as a yielding currency and on top of this, commodity prices are continuing to decline, which is very negative for the Australian economy.

This means that the currency will have to rely on external forces for direction and with the trade wars between the US and China brewing, investors are expected to avoid the riskier currencies which includes the Australian dollar.

 “With no yield support, in a world moving towards monetary policy normalization, and with only minor upside on the commodity front, domestic data is likely to play second fiddle in influencing the AUD,” said analysts from ANZ“

“The escalating trade war between the US and China doesn’t bode well for the Australian economy and cyclical currencies in general. On this front, risk sentiment remains fragile.” They added.

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