Can the Australian Dollar Fend of Risk Aversion with an RBA Rate Hike?
The Australian dollar would respond as expected to the sharp turn in risk appetite Thursday and Friday. And, while it is not surprising that there was room to retrace some of the speculatively driven value in the currency; it is interesting that the promising economic outlook and commendable interest rate bias have not buffered much of the dramatic deflation. We will see whether the Aussie’s standing as the most fundamentally appealing currency in the FX market can thwart a potential reversal in sentiment next week as the RBA convenes and the 3Q GDP numbers approach. There is a 64 percent chance of a 25bps hike on December 2nd; so a hold could in fact catalyze a turn.
