Australian dollar yield benefits looks over
Published on 19.02.2018 16:04

Australian dollar yield benefit looks finished

The Australian dollar has held up well against its US counterpart in recent weeks but things may be about to change as the US Federal Reserve gears up to hike interest rates next month.

Towards the end of las year, rumors spread that the Reserve Bank of Australia would begin hiking rates this year which would have kept the cash rate in Australia above rates in the US but recent data has shown the Australian economy is not ready for higher rates,

“We see no reason to change our view that the Aussie cash rate will remain on hold in 2018 and 2019. Early this year markets were fully priced for a hike by Dec 2018 but after the muted Q4 CPI and equity turbulence are now back to about 60% chance,” says Sean Callow, head of G10 FX strategy at Westpac.

Next months expected rates hike from the Fed will interest rates on par with Australia at 1.5 percent which hasn’t been seen in over a decade.

The Fed is expected to raise rates at least 4 times this year which would put them well above rates in Australia and give investors little reason to hold Australian dollars so the risk for a large pullback is growing by the day.

The Aussie dollar has enjoyed immense support over the past decade as one of the highest yielding currencies in the world but for now this benefit looks well and truly over.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

The world of trading has no boundaries

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

×

Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.

Important notice
By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.