Further pressure expected for Australian dollar
Published on 22.02.2016 15:21

The Australian dollar is trading higher today even after Reserve Bank of Australia board member John Edwards mentioned he would be comfortable with the local currency trading substantially lower.
Mr Edwards told the wall street  journal that he would like to see the Australian dollar trading at around US65c which is well below its current levels although he doesn’t think it will fall that far anytime soon.
His remarks echo many other analysts who see the usual correlation between the Iron ore price and the Australian dollar breaking apart which in itself should see the currency lower at this stage.
Historically the price of Australia’s biggest commodity and the Australian dollar have fallen in tandem with each other.
 “It does look like the Australian dollar has found a base, and I guess I would say I still think it is a bit too high,” Mr Edwards said.
 “If it was driven entirely by commodity prices, it certainly should be lower,” he also noted.
Also pressuring the Aussie dollar today is the fall in oil prices overnight after remarks by Saudi foreign minister Adel al-Jubeir who said that “supply and demand by market forces” would determine the oil price.
 The comments seemed to have all but finished the apparent deal between Saudi Arabia and Russia to cut output and freeze the oil price
Oil prices eased overnight which put pressure on commodities and commodity currencies, such as the Australian dollar, following comments from Saudi Arabia that all seemingly dashed hopes of a deal to strike a freeze in production to January levels.

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Andrew Masters

Analyst

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